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Basic Question 4 of 5
A defined contribution pension plan:
II. promises to pay retirees a specific income stream.
III. pays defined benefits for a certain period after retirement.
I. disburses benefits based on the returns on the fund's investments.
II. promises to pay retirees a specific income stream.
III. pays defined benefits for a certain period after retirement.
User Contributed Comments 6
| User | Comment |
|---|---|
| Will1868 | In reality however the withdrawl's from 401(k)'s and other defined contribution plans are as much a funtion of the owners need for that money as it is the return in the fund. For instance if I need 40k/yr in retirement to live on I will take it from my 401(k) if I have to other source - even if that means depleting it faster than the growth of my investments would support. |
| ehc0791 | None of them is defined contribution plan. |
| jhmorris | The answer given is correct. Since a defined contribution plan is owned and directed by the employee, the benefits received by the employee are directly related to the investment performance of the account, rather than a guaranteed income stream from their employer. |
| AusPhD | jhmorris is correct |
| davidt876 | damn myasking... the question is explicitly asking about defined contribution plans.. will1868, even if your withdrawals > fund earnings, you are still benefitting from current and past investment growth in the fund |
| blackyosh1 | according to investopedia, in a defined contribution plan, the employee makes contributions which is matched by employers and the employee has discretion on how to invest and is liable for whether or not benefits are paid out. |
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Learning Outcome Statements
describe the types of post-employment benefit plans and implications for financial reports;
CFA® 2025 Level II Curriculum, Volume 2, Module 11.