Defined Contribution Plan Definition

An individual account plan that allows an employer to contribute a specific amount of money that is distributed to the accounts of each of the plan participants, generally for benefit purposes.

Defined Contribution Plan Extended Definition
A defined contribution provides a way for a company to set aside dollars to pay for certain employee benefits. For example, many retirement plans include a defined contribution plan at the onset. This gives the employer the opportunity to contribute a specific amount oftentimes matched at a percentage to what the employee contributes.

A number of factors determine the retirement benefit received under a defined contribution retirement plan. Some of these factors include the distribution or withdrawal option at the time of retirement and the amount of fund contributed. This type of plan fits under the Internal Revenue Service’s Code 403(b), Individual Contribution and 401(a), Employer Contribution.

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Last Updated By

Maria Tanski-Phillips | Feb 24, 2023