In a defined contribution pension plan (DCPP), what determines the benefits payable?

In a defined contribution pension plan (DCPP), what determines the benefits payable?

• A. Benefits are fixed regardless of contributions
• B. Benefits are payable and determined by members and/or employer contributions and investment performance within the plan on those contributions
• C. Benefits are determined solely by the employer
• D. Benefits are guaranteed by the government

Answer: (B)

In a defined contribution plan, the retirement benefit is not fixed. The amount you receive depends on how much is contributed (by you and your employer) and how those contributions grow through investment performance inside the plan. The plan builds a fund from contributions and investment earnings, and the payout at retirement (or on withdrawal) is the fund’s value, not a predetermined amount. This means investment returns and the level of contributions directly shape the benefit. It’s not guaranteed by the government, and it isn’t determined solely by the employer.

In a defined contribution plan, the retirement benefit is not fixed. The amount you receive depends on how much is contributed (by you and your employer) and how those contributions grow through investment performance inside the plan. The plan builds a fund from contributions and investment earnings, and the payout at retirement (or on withdrawal) is the fund’s value, not a predetermined amount. This means investment returns and the level of contributions directly shape the benefit. It’s not guaranteed by the government, and it isn’t determined solely by the employer.