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Defined Contribution Plan

Defined Contribution Plan

Definition

A pension plan calling for definite annual contributions by the employer but with no specific benefit promised to the employee. The employee's benefits are ultimately determined by the amount contributed plus the investment income.

Related Terms

Defined Benefit Plan

A pension plan providing a specific benefit for each employee. The employer is required to make adequate contributions to the plan to fund the promised benefits. No individual accounts are maintained as is done in defined contribution plans.
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