Final answer:
The claim that unions prefer defined contribution plans because it limits their financial obligations is false. Unions typically favor defined benefits plans, offering stable post-retirement income. Defined contribution plans like 401(k)s shift more financial responsibility to employees.
Step-by-step explanation:
The statement that unions often prefer defined contribution plans because it limits their financial obligations to fund the plan is false. Unions typically favor defined benefits plans because these plans provide a predictable, stable income for retirees, which increases in line with inflation or cost of living adjustments. Defined contribution plans, such as 401(k)s and 403(b)s, involve both employer and employee contributions with funds invested in various investment vehicles.
These plans are beneficial for the worker since they are portable and tax-deferred, allowing the retiree's savings to potentially grow at real rates of return, offsetting the effects of inflation. However, the financial obligation and investment risk are shifted more onto the individual employee rather than the employer or union.