Save time with our cheat sheets, fact sheets, checklists & books!

February 19, 2009

Defined contribution plan



What is a defined contribution plan?

An employer sponsored qualified-plan , where employees receive a promised contribution to their account . The contribution can be mandatory ( required each year) or discretionary, depending on the type of defined contribution plan. An example of  a defined contribution plan with a mandatory contribution feature is a money purchase pension plan. An example of a defined contribution plan with a discretionary contribution feature is a profit sharing plan.

Other examples of defined contribution plans include  target benefit plans, Employee stock ownership plans (ESOPs) ,stock bonus plans, 401(k) plans and thrift plans.

Referring Cite

IRC § 414(i), ERISA §3(34);

Additional Helpful Information

The employee’s benefit ( account balance ) in a defined contribution plan is the contributions made to the employee’s account, adjusted by earnings and losses.

Related Articles Tutorial or Other Content


Keep Learning

Qualified Charitable Distribution (QCD)

Definition A distribution that is excludable from the distributee’s income, as a result of meeting the following requirements: It is made after the distributee reaches

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Catch-up Contribution

Definition An additional contribution that can be made to a retirement plan by a participant who is at least age-50 by the end of the

Be among the first to know when

IRA Rules