Which of the following statements is true regarding a defined contribution pension plan?

Question

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In defined contribution plans, the employer defines how much money will be contributed to the plan, but the benefits paid to the employee (or retiree) are not defined by the plan. Therefore, the employer is not obligated to pay a certain benefit amount upon retirement. This is in contrast to defined benefit plans, where the employer is obligated to pay a specific benefit amount to the employee upon retirement. Choice A is incorrect because it describes a defined benefit plan. Choice B is incorrect because defined benefit plans generally have more complex accounting issues than defined contribution plans. Choice D is incorrect because employers that use defined benefit plans assume more risk than those that use defined contribution plans since they are obligated to pay a specific benefit amount, regardless of investment performance.

Which of the Following Statements Is True Regarding a Defined