Florian Ltd. has created a new plan for its employees. Florian Ltd. contributes 1% of an employee's pay into an account. These contributions are invested on the employee's behalf. The value of the account will fluctuate due to changes in the value of the investments, leaving the eventual benefit to the employee subject to market conditions. Florian Ltd. has no obligation to make further contributions if there are significant investment losses. What type of plan is this?
A. Multi-employer plan
B. Insured plan
C. Defined contribution plan
D. Defined benefit plan
This plan is a C. Defined contribution plan. In a defined contribution plan, the employer and/or employees contribute a fixed amount or percentage of the employee's pay, which is then invested on the employee's behalf. The ultimate benefit received by the employee depends on the performance of the investments, and the employer has no obligation to make additional contributions if there are investment losses.
