The key difference between defined benefit and defined contributions post-employment plans is that:

Question

Quizplus · Accepted Answer

In a defined benefit plan, the employer bears the risk of ensuring that the employee receives the promised benefits, regardless of investment performance. In a defined contribution plan, the employee bears the investment risk and is responsible for managing and investing the contributions made by the employer. Therefore, the key difference between the two is that the employer bears the risk in a defined benefit plan, whereas the employee bears the risk in a defined contribution plan. Option A and B are incorrect as they attribute the risk to the wrong party. Option D is also incorrect as the fund does not bear any risk in a defined contribution plan.

The Key Difference Between Defined Benefit and Defined Contributions Post-Employment