With a defined contribution plan the risk of pension fund performance rests with the employees/retirees of the company, while with a defined benefit plan this risk rests with the company.

Question

Quizplus · Accepted Answer

In a defined contribution plan, the employer contributes a certain amount to the employee's retirement account, but the ultimate value of the account depends on the investment performance. Therefore, the risk of pension fund performance rests with the employees/retirees. In a defined benefit plan, the employer is responsible for providing a specific, predetermined benefit to the employee upon retirement, regardless of the investment performance. Therefore, the risk of pension fund performance rests with the company.

With a Defined Contribution Plan the Risk of Pension Fund