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A plan that contains a formula for determining retirement benefits is known as a ________.

1) defined contribution pension plan
2) defined benefit pension plan
3)ash balance plan
4) 401(k) plan

User Ykadaru
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Final answer:

A retirement plan with a formula for determining benefits is a defined benefit pension plan, which differs from defined contribution plans like 401(k)s, and faces challenges from inflation over time.

Step-by-step explanation:

A plan that contains a formula for determining retirement benefits is known as a defined benefit pension plan. Unlike defined contribution plans such as 401(k)s and 403(b)s, where the employer contributes a fixed amount to the worker's retirement account, a defined benefit plan promises a specific benefit at retirement which is usually calculated based on factors like salary history and duration of employment.

Most traditional pensions are considered defined benefits plans, as they provide a fixed nominal dollar amount per year during retirement, often creating challenges due to inflation and fixed income issues over time.

User Shubham Panchal
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