Defined contribution plan

Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia.

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 ?
The primer outlines principles on fee disclosure, general guidelines and investment- specific information for sponsors to consider when developing fee disclosure materials for 401(k) or other types of defined contribution plans.
Notice 98-29 states that the IRS and Treasury Department are considering whether it would be appropriate to develop additional relief for elective transfers between defined contribution plans.
All Oakland County employees hired after July 1, 1994, are automatically enrolled in the new defined contribution plan.
I also believe you need a dedicated staff for all of your defined contribution plans, but especially for the GIC option.
52) For defined contribution plans, the specified minimum benefit is calculated at an allocation rate of at least 3 percent of the employee's compensation for the year.
Besides adding investment options (46%) and enhancing participant education (45%), offering investment advice (31%) is a high priority for changes in defined contribution plans in the coming year.
In its profile of Slavin and InvestLink, Defined Contribution Letter noted that the firm's flagship record-keeping system, TotalServiceManager(TM), supports daily valuation and balanced-forward record-keeping defined contribution plans.
4972(c)(6), contributions to defined contribution plans that are nondeductible because they exceed the 25% limit on combined contributions are not subject to the excise tax, if the contributions to such plans do not exceed 6% of compensation.
There should be a maximum benefit provided from retirement plans and a maximum contribution allowable for defined contribution plans.
With American workers turning 60 at the rate of one every eight seconds, Prudential Retirement, a business of Prudential Financial (NYSE:PRU), has responded to the pending "retirement revolution" by introducing Prudential IncomeFlex(SM), a new patent-pending defined contribution plan feature that combines the security of lifetime income with the opportunity to capture market upswings and the flexibility to control fund assets.
a wholly owned affiliate which provides fully bundled defined contribution plan services in the United States.