Defined Contribution Plan
A Defined Contribution Plan is a type of retirement savings plan where the employer, employee, or both make contributions on a regular basis. The amount contributed is defined, but the future benefits received at retirement are not guaranteed and depend on investment performance.
In this plan, individual accounts are maintained for each participant, and the ultimate retirement benefit is based on the total contributions made and the investment earnings on those contributions over time. Common examples of Defined Contribution Plans include 401(k) plans, 403(b) plans, and profit-sharing plans. Participants typically have the ability to choose how their contributions are invested among a selection of options provided by the plan.
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