What are defined-contribution retirement plans?
A defined-contribution plan is a plan in which an employee’s benefits during retirement depend on the contributions made to and the investment performance of the assets in his or her account, rather than on the employee’s years of service or earnings history. Like a typical savings account, a defined-contribution account contains a specific balance at any given time, which is equal to the market value of the assets accumulated in the account. Unlike with a defined-benefit plan, employees have substantial control over how the contributions to their plan are invested and may generally choose from an assortment of stocks (often including company stock), bonds, mutual funds, and other investment vehicles. Examples of defined-contribution plans include 401(k) plans, 403(b) plans, and 457 plans, all of which share similar characteristics. • The proportion of employees participating in defined-contribution plans has gradually increased over the past several decades, and today stands at about
