What is the purpose of a defined benefit plan?
A defined benefit plan promises a specified monthly benefit at retirement.
Which plan type allows employee salary deferral?
401(k) plans allow employees to contribute pre-tax income toward retirement savings.
What is a vesting schedule?
A vesting schedule outlines when employees gain full ownership of employer contributions.
Which plan allows employers to contribute a fixed percentage of salary?
A money purchase pension plan requires employers to contribute a set percentage each year.
What is a common feature of defined contribution plans?
Defined contribution plans specify employer and employee contributions but not the final benefit.
What plan is commonly used by nonprofit organizations?
403(b) plans are designed for employees of nonprofit organizations and public schools.
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What is a key benefit of automatic enrollment in retirement plans?
Automatic enrollment increases participation rates and encourages early saving.
Which agency insures defined benefit pension plans?
The PBGC protects participants in private-sector defined benefit plans.
What type of plan provides a lump sum at retirement?
Some defined contribution plans provide a lump sum based on total contributions and investment gains.