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Answer: The employee assumes the investment and inflation risk.
**Explanation:** - **Option A** is correct because, in a defined contribution (DC) plan, the employee assumes the investment and inflation risk. The employee is also responsible for ensuring sufficient assets are available to meet retirement needs. - **Option B** is incorrect because the responsibility for adequately funding the plan applies to defined benefit (DB) plans, where the employer typically bears the risk of funding the promised benefits. - **Option C** is incorrect because defined contribution (DC) plans usually involve lower costs and risks for the company compared to defined benefit (DB) plans.
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Which of the following best describes a characteristic of defined contribution pension plans?
A
The employee assumes the investment and inflation risk.
B
The employer bears the responsibility for adequately funding the plan.
C
Defined contribution plans generally entail higher costs for the company compared to defined benefit plans.