Defined contribution plans may have unfunded actuarial liabilities, and defined benefit plans do not.

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A defined benefit plan is one in which the plan is required to pay out a certain level of benefit based on a formula. The benefit is paid out regardless of the amount available in the plan. It is possible for the fund to have unfunded liabilities. A defined contribution plan provides an individual retirement account for each participating employee and no obligation exists for pension benefits beyond what has been accumulated in each individual's account.

Defined Contribution Plans May Have Unfunded Actuarial Liabilities, and Defined