Question

Which of the following characteristics describe defined contribution plans? (Check all that apply.)

a) Individual Accounts
b) Guaranteed Income
c) Employer Bears Investment Risk
d) Employee Investment Control

Answer 1

Defined contribution plans such as 401(k)s and 403(b)s feature individual accounts and employee investment control, with the employee bearing investment risk, and are tax deferred and portable.

Step-by-step explanation:

The characteristics that describe defined contribution plans include Individual Accounts and Employee Investment Control. Unlike defined benefit plans, defined contribution plans such as 401(k)s and 403(b)s do not guarantee income. Instead, they allow employees to control their investments and bear the investment risk. Employers contribute a fixed amount to the plan, which the employees can then invest in a range of investment vehicles. These plans are often tax deferred and portable, meaning they can be transferred to a new employer if an individual changes jobs.