Question

Under which pension plan will an employer assume a higher degree of risk? defined-benefit or defined contribution?

Answer 1

Answer---defined benefit

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In defined benefit plan the amount of pension to be provided by employer is calculated in advance. For this amount employer bears all the amount on the other hand in defined contribution plan major portion is deposited by employee and some by employer. Generally employer deposit an amount in an investment which is used to pay employee when they retire. The risk of change in value of investment is the risk employer takes.

Apart from that in defined contribution pension amount is deposited every time employee gets a pay. Defined benefit is a fixed amount of payment calculated in advance to be paid to employee.

So in short defined benefit plan is more risky and rather outdated plan.