What Is the Key Distinction Between a Defined Benefit Superannuation

question 7

Multiple Choice

What is the key distinction between a defined benefit superannuation plan and a defined contribution superannuation plan?

• A) A defined benefit plan accumulates funds through investments in real assets such as land and buildings whereas a defined contribution plan accumulates funds through investments in shares and other more liquid assets.
• B) A defined benefit plan is run by professional trustees who seek the support of investment advisors and consultants. A defined contribution plan is normally run by trustees appointed by the employer and focuses on simple formulas for investment.
• C) The assets of a defined benefit plan are the focus in determining the benefits that will be paid out to members, whereas for a defined contribution plan the benefits are measured through the liability to members.
• D) A defined benefit plan's accrued benefits are determined by reference to the provisions of the superannuation plan trust deed's payment formulas. A defined contribution plan's accrued benefits are determined as the difference between the assets and other liabilities of the fund.
• E) None of the given answers.

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