Malcolm is interviewing for a new job and he is evaluating the quality of the pension plans offered for each company he is considering.One company offers a pension plan in which the company will make all contributions to the plan and will base his pension benefit on a formula linked to his pay at the time of retirement and the number of years he works for the firm.This pension plan could be classified as a ________.
A) non-contributory, defined contribution
B) contributory, defined benefit
C) non-contributory, defined benefit
D) contributory, qualified plan

Question

Quizplus · Accepted Answer

The employee contributes to the contributory pension plan, while the employer makes all contributions to non-contributory plans. With defined benefit pension plans, employees know ahead of time the pension benefits they will receive (the benefit is "defined" or specified by amount or formula). Defined contribution pension plans specify what contribution the employee and/or employer will make to the employee's retirement or savings fund. Therefore, Malcolm has a non-contributory, defined benefit pension plan.

Malcolm Is Interviewing for a New Job and He Is