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Homework answers / question archive / Which of the following statements regarding defined contribution plans is incorrect? Select one: a
Which of the following statements regarding defined contribution plans is incorrect? Select one: a. They include fixed contributions paid by the employer to an employee's superannuation fund. b. The amount received by employees upon their retirement is dependent on the level of contributions made and the return earned by the fund on its investment. O c. The amount of the contribution is normally based on a percentage of the employee's wages. d. The employer has a legal obligation to pay further contributions if the fund does not hold sufficient assets to pay it members.
Solution
Which of the following statements regarding defined contribution plans is incorrect?
The incorrect statement is –
Option d. the employer has a legal obligation to pay further contributions if the fund does not hold sufficient assets to pay its members.
Explanation –
The defined contribution plan does not impose any legal obligation on the employer to pay further contribution if the fund does not hold sufficient assets to pay its members.
Defined contribution plan is a post-employment benefit, under which both employer and employee make fixed contributions to a separate fund. The contributions are normally made as a percentage of the employees wages.
The amount to be received by the employee on retirement is not specified and is dependent the contributions made as well as the returns earned by the fund to which contributions are made.
