Which of the Following Statements About Defined Contribution Plans Is

question 6

Multiple Choice

Which of the following statements about defined contribution plans is incorrect?

• A) In general, employees can choose the investment vehicle under a defined contribution plan.Thus, highly risk-averse employees can choose low-risk investments, while more risk-tolerant employees can choose high-risk investments.
• B) In a defined contribution plan, the employer must make larger-than-average contributions to the pension plan when investment returns have been below expectations.
• C) Defined benefit plans are used more often by large corporations than by small companies.
• D) The PBGC insures a portion of pension benefits.
• E) A defined contribution plan places the risk of poor pension portfolio performance on the employee.

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Definitions:

Outstanding

Refers to something that is still due, unresolved, or remaining to be paid or completed.

In Treasury

Refers to stocks or bonds that a company keeps in its own treasury after they have been repurchased or are not yet issued.

Noncumulative

A characteristic of certain preferences or instruments that do not allow for the accumulation of unpaid dividends or benefits if they are not paid in a given period.

Nonparticipating

In the context of insurance or preferred stock, it refers to policies or shares that do not share in the profits beyond a specified amount.