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    Defined Benefit versus Defined Contribution Plans

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    Please help with the following problem:

    I am researching both defined contributions plans and defined benefit plans, I can not find where one is more beneficial over the other for either employee or employer. They both have their advantages and disadvantages.

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    Solution Preview

    While individual employees and employers might have different preferences from the norm, employers generally prefer defined contribution plans and employees generally preferred defined benefit plans.

    Let's start with employers. Employers prefer defined contribution plans because it shifts market risk from them to the employees. Employers are only obligated to contribute the amount that is set by the plan for each employee. Once that amount is contributed, the employer bears no more risk. For ...

    Solution Summary

    General overview of whether employees prefer defined benefit or defined contribution plans, and whether employers prefer defined benefit or defined contribution plans. The advantages and disadvantages of both are given. This solution is given in 321 words.