Paul earns $55,000 during the current year.His employer contributes $3,000 during the year to a qualified retirement plan on behalf of Paul.The amount of the contribution for the year is based on Paul's desire to have a monthly retirement benefit of $3,500.What type of retirement plan is this?

Question

Quizplus · Accepted Answer

The fact that the contribution is based on Paul's desired monthly retirement benefit suggests that this is a defined benefit plan, where the retirement benefit is predetermined based on a formula that takes into account factors such as years of service and average salary. The fact that Paul's employer is contributing to the plan on his behalf also suggests that it is a qualified retirement plan that meets certain requirements under the Internal Revenue Code.

Paul Earns $55,000 During the Current Year