Which of the following describes a defined contribution plan?
A)Provides guaranteed income on retirement to plan participants.
B)Employers and employees generally may contribute to the plan.
C)Generally set up to defer income for executives and highly compensated employees but not other employees.
D)Retirement account set up to provide an individual a fixed amount of income on retirement.Employers and employees generally contribute to the plan.

Question

Quizplus · Accepted Answer

A defined contribution plan is where both the employer and employees may contribute to the plan. This is different from a defined benefit plan which provides guaranteed income on retirement to plan participants. Option C is incorrect as defined contribution plans may be set up for all employees, not just executives or highly compensated employees. Option D is incorrect as a defined contribution plan does not guarantee a fixed amount of income on retirement, as the amount of retirement income depends on the contributions made to the plan and the investment returns earned by the plan.

Which of the Following Describes a Defined Contribution Plan