Final answer:
A pension plan where the employer contributes a specified amount to an employee's retirement fund is known as a defined contribution plan, examples of which include 401(k)s and 403(b)s. These plans are portable and tax-deferred, providing the employee the flexibility to move the plan between employers and manage their investments.
Step-by-step explanation:
A type of pension plan that specifies what contribution the employer will make to a retirement or savings fund set up for the employee is called a defined contribution plan. These plans, which include popular options such as 401(k)s and 403(b)s, involve the employer contributing a fixed amount to the worker's retirement account on a regular schedule, often every paycheck. Unlike the traditional defined benefits plans, these are more flexible and offer portability, meaning if an employee moves to a different employer, their retirement plan moves with them.
These retirement savings accounts are tax-deferred, which provides tax benefits up until the funds are withdrawn, usually after retirement. Defined contribution plans empower employees to make investment decisions with the funds contributed, potentially gaining better returns and offsetting the effects of inflation over time.