Final answer:
The investment risk in a Money Purchase Pension Plan and a Target Benefit Pension Plan is borne by the plan participant, as opposed to a Defined Benefit or Cash Balance Pension Plan where the employer assumes the risk. Defined contribution plans like 401(k)s and 403(b)s are becoming more popular as they are portable and provide tax benefits, with investment risks carried by the employee.
Step-by-step explanation:
Among the listed pension plans, Money Purchase Pension Plan and Target Benefit Pension Plan are the types where the investment risk is borne by the plan participant. Defined Benefit Pension Plan and Cash Balance Pension Plan, in contrast, guarantee a certain payout at retirement and the employer bears the investment risk to ensure that the promised benefit is met. However, in a Money Purchase and Target Benefit plans, the contribution is defined, but the benefit is not guaranteed and relies on the investment performance.
In a defined contribution plan like a 401(k) or 403(b), the employer contributes a fixed amount to an employee's retirement account, and the employee may contribute as well. The funds are invested in numerous investment vehicles chosen by the employee, which means that the employee bears the risk of investment performance. These contributions are tax-deferred and portable, increasing their appeal to employees. If the investments perform well, the employee benefits from real rates of return, mitigating the effects of inflation that more traditional pensioners might face.
The correct answer to the question is: a.) 3 and 4 only.