The retirement plan that promises to pay a specific benefit to its beneficiaries is
A) A defined contribution plan.
B) A defined benefit pension plan.
C) A non-contribution pension plan.
D) An actuarial pension plan.
E) Supplemental Retirement Account (SRA).

Question

Quizplus · Accepted Answer

A defined benefit pension plan is the retirement plan that promises to pay a specific benefit to its beneficiaries, usually based on a formula that takes into account the employee’s years of service and salary history. In contrast, a defined contribution plan only specifies the amount that an employer or employee will contribute to the plan, with no guarantee of the final benefit amount. The other options (C, D, and E) are not recognized types of retirement plans.

The Retirement Plan That Promises to Pay a Specific Benefit