Defined Contribution Plan

 

All defined contribution plan types provide for an individual account for each participant and for benefits based solely upon the amount contributed plus all income less expenses or losses, and any forfeitures which may be allocated to the participant's account.

 

Since the contributions, investment results and forfeiture allocations vary year by year, the ultimate retirement benefit in a defined contribution plan cannot be predicted.

 

Advantages 

Easier for employees to understand.

Relatively simple to administer.

Plan investment experience affects employees' retirement benefit.
 

Disadvantages

The maximum annual contribution (employer and employee) made on behalf of any participant is limited for 2021 to the lesser of 100% of compensation or $58,000. In addition, employer contributions cannot exceed 25% of the total compensation of all eligible employees.

 

*Considered compensation cannot exceed $290,000 (2021 - indexed).