Question

Contributions to traditional defined contribution plans can be made with (1)-tax dollars, which reduces the overall cost because of the tax (2) on the contribution.

a) Pre-tax; Deduction
b) Post-tax; Credit
c) Tax-free; Rebate
d) Taxable; Surcharge

Answer 1

Contributions to traditional defined contribution plans are made with pre-tax dollars and are tax-deductible, reducing the employee's taxable income.

Step-by-step explanation:

Contributions to traditional defined contribution plans, such as 401(k)s and 403(b)s, are made with pre-tax dollars. This approach reduces the overall cost to the employee because there is a tax deduction on the contribution. Hence, the correct answer to the question is a) Pre-tax; Deduction. Traditional defined contribution plans allow employers to contribute a fixed amount to an employee's retirement account, which grows tax-deferred. The employee can also make contributions. The funds can be invested in a variety of investment vehicles, and these plans are portable, enabling retirement savings to continue growing even when changing employers.