Defined contribution plans ultimately transfer retirement income risk from the employer to the employee.

Question

Quizplus · Accepted Answer

With defined contribution plans, such as 401(k)s, the employer provides a certain amount of contributions but the employee is responsible for managing and investing those funds. In contrast, with defined benefit plans, such as traditional pensions, the employer bears the risk of providing a specific retirement income to the employee. Therefore, defined contribution plans do ultimately transfer retirement income risk from the employer to the employee.

Defined Contribution Plans Ultimately Transfer Retirement Income Risk from the Employer