Defined-contribution Plan

Defined-contribution Plan

Defined-contribution Plan means:
a deferred retirement plan that provides a separate account for each person covered by the plan; contrast with the entry with defined-benefit pension plan. Future benefits are based only on amounts contributed to or allocated to each account. Types of defined-contribution plans include profit-sharing plans, and stock bonus plans. For plan years after 1986, the annual addition under a defined-contribution plan is limited to the lesser of $30,000 or 25% of compensation for the year. This limit is tied to the dollar limit for defined-benefit plans, as adjusted by cost-of-living adjustments. The annual addition includes items such as employer contributions and certain employee contributions. Former IRC (check if this IRC provision is current here) §§4l4(i) and 415(c).

Description and Definition of Defined Contribution Plan

A retirement plan of which the contributions are based upon a specific amount or formula. Contributions are generally based on a percentage of salary or earned income.


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