Defined Contribution Plan

A defined contribution plan (DC) is a pension plan such as a 401(k) where the plan participant such as an employee assumes responsibility for directing plan assets among various investment options. In contrast to a defined benefit plan, the participant assumes market risk under a defined contribution plan. In addition, the participant assumes responsibility for converting accumulated assets into a stream of income when they retire. In other words, assets need to accumulate during working years and then the participant is responsible for figuring out what to do with that sum of money when they retire. The number of defined contribution plans has increased significantly over the past 20 years.