Question

What is the difference between defined benefit and defined contribution pension plans? Identify the plan that provides the greater amount of risk for the spouse receiving benefits (assuming continued existence of the plan).

Answer 1

Answer)

A defined benefit pension plan is a plan where employer promises to pay certain amount after the retirement to the employee or his spouse in case the employee die.A defined contribution pension plan is one that the employee solely or along with employer will contribute certain funds which are invested by employer for different purpose which will be given to the employee after retirement or to spouse of employee if theof employee died.

Here,the employees contribution pension plan would be more riskier considering the assumption given in the question because If the employer fails to invest them in good investment then the spourse of employee may get less than market rate of interest as excess of even loss with which the spourse must live for rest of her life.