Final answer:
Stock bonus plans are entirely employer-funded as part of a company's profit-sharing plan, with benefits distributed as company stock. They are separate from defined contribution plans like 401(k)s, which typically include contributions from both employers and employees. Traditional employer-funded pensions, backed by pension insurance, guarantee benefits even if an employer cannot pay its promised pensions.
Step-by-step explanation:
Stock bonus plans are an employer-sponsored benefit that can be an integral part of a retirement savings program. In terms of funding, stock bonus plans are funded entirely by the employer. They are a form of a company's profit-sharing plan where benefits are paid in the form of company stock. These plans differ from other retirement savings options such as 401(k)s and 403(b)s, which are classified as defined contribution plans and typically involve contributions from both the employer and employee.
In a defined contribution plan, the employer typically contributes a fixed amount to the employee's retirement account regularly, and the employee may contribute as well. This contrasts with a stock bonus plan, which is solely funded by the employer. While pension plans are increasingly being replaced by defined contribution plans, it’s important to note that traditional pension plans and related insurance such as pension insurance are also employer-funded benefits designed to provide security to employees post-retirement. Pension insurance ensures that retired employees receive at least some pension benefits through the Pension Benefit Guarantee Corporation if the employer goes bankrupt and cannot pay the pensions it has promised.