Defined Contribution Plan at Legal Glossary

What is it? A type of pension plan that does not guarantee any particular pension amount upon retirement. Instead, the employer pays into the pension fund a certain amount every month, or every year, for each employee. The employer usually pays a fixed percentage of an employees wages or salary, although sometimes the amount is a fraction of the companys profits, with the size of each employees pension share depending on the amount of wage or salary. Upon retirement, each employees pension is determined by how much was contributed to the fund on behalf of that employee over the years, plus whatever earnings that money has accumulated as part of the investments of the entire pension fund.

Law Definition Added By: Jack

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