Jenny must contribute at least 5% of her annual salary to her pension plan, and her employer contributes a set amount as well. She is given choices regarding how the money is invested. When she retires, the amount she has available will depend on how much she invested herself, and the rate of return on the investments she chose. This pension plan is most likely classified as ________.
A)qualified, defined benefit
B)non-contributory, defined benefit
C)contributory, defined contribution
D)contributory, non-qualified

Question

Quizplus · Accepted Answer

C)The employee contributes to the contributory pension plan, while the employer makes all contributions to non-contributory plans. With defined benefit pension plans, employees know ahead of time the pension benefits they will receive (the benefit is "defined" or specified by amount or formula). Defined contribution pension plans specify what contribution the employee and/or employer will make to the employee's retirement or savings fund. Therefore, Jenny has a contributory, defined contribution plan.

Jenny Must Contribute at Least 5% of Her Annual Salary