Which of the following is/are true about pension plans?
I. In a defined benefit plan, the investment risks are borne by the employer.
II. In a defined contribution plan, the investment risks are borne by the employee.
III. The employee has investment flexibility with defined contribution plan.
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A. B. C. D.C
In a defined benefit contribution plan, the employee makes definite contributions to the pension plan from the regular salary. Investment of these contributions is at the discretion of the employee and the size of the benefits paid out depends upon the total contributions made and the fund performance. Thus, in this plan, the risk of pension plan performance is borne by the employee and not the employer.