Question

Chapter 8 - Question 8 :

Help me to explain this question. Thank you

Which of the following qualified plans require mandatory funding?

1.      Defined benefit pension plans.

2.      401(k) plans with an employer match organized as a profit-sharing plan.

3.      Cash balance pension plans.

4.      Money purchase pension plans.

Answer 1

In the above question, the only plan in which employees contribution is mandatory is 401(k) plans

The employee must contribute a specified percentage into the plan or employees to receive a contribution from the employer, on the other hand,

The money purchase plan and defined benefit plan seeks the discretion of employees whether they would like to contribute a sum to the plan

whereas the cash balance pension plan does not allow the employees to contribute at all.