Life · Chapter 11 · Employer Plan Types
Defined Contribution Plan
Definition
The plan defines the CONTRIBUTION formula; the final benefit varies with contributions + investment performance. The EMPLOYEE bears the investment risk and chooses among plan investments; low cost/risk for the employer. Types: money purchase, profit-sharing, stock bonus, ESOP.
Exam tip
Contribution known, benefit unknown. Flip it for the defined BENEFIT plan: benefit known, employer bears the risk.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
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