Question

Under contributory plans, do employees bear the majority of the costs of the plan and contribute towards the plan with deductions from their salaries.

1) True
2) False

Answer 1

Employees do contribute to their contributory plans such as 401(k)s and 403(b)s along with employer contributions, and these plans are portable for the employees upon changing jobs.

Step-by-step explanation:

The statement that under contributory plans, employees bear the majority of the costs of the plan and contribute towards the plan with deductions from their salaries is True. Unlike traditional defined benefits pension plans, defined contribution plans such as 401(k)s and 403(b)s involve both employer and employee contributions. The employer contributes a fixed amount to the retirement account regularly, and the employee often contributes as well. These contributions are invested and are tax-deferred, providing a portable financial resource for the employee's retirement that can be taken to a new employer if the individual changes jobs.