Defined contribution plan

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Defined contribution plan

A pension plan whose sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: Defined benefit plan

Defined Contribution Plan

A retirement plan in which the employee and/or employer contribute a set dollar amount each month. The benefits of a defined contribution plan are not set, and depend upon how well the contributions are invested before the pensioner starts to make withdrawals. The disadvantage of a defined contribution plan is the possibility that the investments will not perform as well as expected, giving the pensioner a less secure retirement. The advantage is that the pensioner, while still making contributions, has the ability to determine how the contributions are invested, at least to a certain extent. See also: 401(k).

Defined contribution plan.

In a defined contribution retirement plan, the benefits -- that is, what you can expect to accumulate and ultimately withdraw from the plan -- are not predetermined, as they are with a defined benefit plan.

Instead, the retirement income you receive will depend on how much is contributed to the plan, how it is invested, and what the return on the investment is.

One advantage of defined contribution plans, such as 401(k)s, 403(b)s, 457s, and profit-sharing plans, is that you often have some control over how your retirement dollars are invested. Your choice may include stock or bond mutual funds, annuities, guaranteed investment contracts (GICs), company stock, cash equivalents, or a combination of these choices.

An added benefit is that, if you switch jobs, you can take your accumulated retirement assets with you, either rolling them into an IRA or a new employer's plan if the plan accepts transfers.

References in periodicals archive ?
Defined contribution pension plans allowing participants to invest in mutual funds
The survey of 240 institutions represents endowments and foundations, sponsors of corporate and public defined benefit pension plans, and sponsors of defined contribution pension plans.
The investment ceiling on the total amount of risky assets will be eased from 40 percent to 70 percent for the defined contribution pension plans and the individual retirement pension plans, and investment restrictions on individual risky assets will be lifted.
Since 2006, plan sponsors have had the opportunity to add a Roth 401(k) option to defined contribution pension plans.
In the case of defined contribution pension plans, the only element fixed in advance is the size of the contribution; the beneficiary would suffer both the risk related to pension fund investments as well as the one related to future inflation.
These structures are often the default option in employersponsored defined contribution pension plans, with more than four out of five employees typically choosing the default, resulting in their investments being switched to low-growth assets too soon.
We are excited to be part of the scheme, which is widely expected to become one of the largest defined contribution pension plans in Europe.
1, DOE's current policy and practices do not require that contractors offer defined contribution pension plans to new employees in order for contractors to be reimbursed for benefit costs.
Defined contribution plans are further classified as defined contribution pension plans or defined contribution profit sharing plans.
The basic characteristics of defined benefit and defined contribution pension plans are shown in Table 2.
pension fund system, away from company-organized and company-managed defined benefit pension plans and toward a system of employee-directed defined contribution pension plans.