Final answer:
Defined contribution plans transfer retirement income risk from the employer to the employee.
Step-by-step explanation:
Defined contribution plans, such as 401(k)s and 403(b)s, are retirement plans in which the employer contributes a fixed amount to the worker's retirement account, and the employee may also contribute. These plans transfer the responsibility of retirement income risk from the employer to the employee.
In defined contribution plans, the retirement income is based on the investment returns generated by the funds in the worker's retirement account.
If the investments perform well, the retiree may have a higher income, but if they perform poorly, the retiree may have a lower income. Therefore, the risk of generating enough retirement income lies with the employee.
So, the statement that defined contribution plans ultimately transfer retirement income risk from the employer to the employee is true.