defined contribution plan


defined contribution plan
defined contribution plan n: a pension plan in which the amount of the contributions made by the employer is fixed in advance and earnings are distributed proportionately

Merriam-Webster’s Dictionary of Law. . 1996.

defined contribution plan
A type of retirement plan that creates an individual account for each employee funded by contributions by the employer, the employee, or both. The amount contributed is set, either as a dollar amount or by formula (for example, a certain percentage of the employee's earnings). Unlike a defined benefit plan, which guarantees that the employee will be paid a certain amount on retirement, a defined contribution plan guarantees the employee only the value of his or her account upon retirement: amounts contributed to the plan plus or minus investment gains or losses. A 401(k) plan is a type of defined contribution plan.
Category: Employment Law & HR → Employee Rights
Category: Employment Law & HR → Human Resources
Category: Personal Finance & Retirement → Money & Taxes for Retirees

Nolo’s Plain-English Law Dictionary. . 2009.

defined contribution plan
USA
A qualified plan that provides an individual account for each participant. A participant's benefit is determined by the value of his account based on:
• The amount of contributions allocated to the account plus any income.
• Expenses.
• Any investment gain or loss credited to or charged against the account.
In a defined contribution plan, the participant bears the investment risk. Examples of defined contribution plans include money purchase pension, profit sharing, 401(k), and employee stock ownership plans.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.