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Difference between revisions of "Defined Contribution Plan"

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(Created page with "{{LocalPension}} ==Overview== A '''defined contribution plan''' is a retirement benefits pension plan is a deferred compensation retirement savings account such as a 401(k) o...")
 
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==Overview==
 
==Overview==
A '''defined contribution plan''' is a retirement benefits pension plan is a deferred compensation retirement savings account such as a 401(k) or 403(b), in which retired employees have no guaranteed benefits. Retirement benefits depend on contributions from the employee and the employer made to an individual account and on how well these contributions perform when invested. This type of pension plan is in contrast to a [[Define Benefit Plan|define benefit plan]], in which retirement benefits are guaranteed to employees according to a certain formula. In a defined benefit plan, employers are responsible to make up the difference if investments fall short of the costs of guaranteed retirement benefits. A defined contribution plan is much less risky for employers, because a defined contribution plan does not hold the employer responsible for providing guaranteed benefits.
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A '''defined contribution plan''' is a retirement benefits pension plan that serves as a deferred compensation retirement savings account such as a 401(k) or 403(b), in which retired employees have no guaranteed benefits. Retirement benefits depend on contributions from the employee and the employer made to an individual account and on how well these contributions perform when invested. This type of pension plan is in contrast to a [[Define Benefit Plan|define benefit plan]], in which retirement benefits are guaranteed to employees according to a certain formula. In a defined benefit plan, employers are responsible to make up the difference if investments fall short of the costs of guaranteed retirement benefits. A defined contribution plan is much less risky for employers, because a defined contribution plan does not hold the employer responsible for providing guaranteed benefits.
  
  
 
[[Category:Terms and definitions]]
 
[[Category:Terms and definitions]]

Revision as of 23:04, 26 June 2013

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Overview

A defined contribution plan is a retirement benefits pension plan that serves as a deferred compensation retirement savings account such as a 401(k) or 403(b), in which retired employees have no guaranteed benefits. Retirement benefits depend on contributions from the employee and the employer made to an individual account and on how well these contributions perform when invested. This type of pension plan is in contrast to a define benefit plan, in which retirement benefits are guaranteed to employees according to a certain formula. In a defined benefit plan, employers are responsible to make up the difference if investments fall short of the costs of guaranteed retirement benefits. A defined contribution plan is much less risky for employers, because a defined contribution plan does not hold the employer responsible for providing guaranteed benefits.