Explain your answer on defined benefits plan and Defined contribution plans and discuss which variables are relevant with each.
A defined benefit plan is often known as pension. The defined benefits plans come in two varieties which are the traditional pension and cash balance plans. In both instances, when you meet the basic eligibility rules you are automatically enrolled in the plan at your workplace. We have some offices that will not enroll you until one has completed your first year on the job but it is important to note that this defined benefit plan fund is different from pension funds where the amount in payout actually depends on the funds invested that means upon retirement a stipulated amount is given to the employee or it may be given monthly throughout the employee lifetime and another benefit is that an employee beneficiaries will keep receiving benefits in case of the demise of the employee while the defined contribution plans tax are deferred till when you want to make withdrawals but in the case of Roth 401(k) contribution are taxable but your withdrawal is tax-free. The Defined contribution plan include automatic contribution increases, hardship withdrawals, loan provisions and catch up contributions for employees of age 50 and older. This defined contribution plan also places restrictions that control when and how an employee will withdraw his funds without penalties which also applies to the defined benefits plan which also set restrictions on when and by what method an employee can withdraw funds without penalties.