Defined-Contribution Plan
Accounting glossary · Understand, connect, apply
A defined-contribution plan requires specified contributions to a separate fund, with the employee’s eventual benefit generally depending on contributions and investment performance, subject to the arrangement.
Example
An employer contributes an agreed percentage of eligible salary to employees’ retirement accounts.
Remember the difference
A plan’s name is not enough to establish its classification. Guarantees or additional obligations can change the analysis.
Updated 3 November 2026. Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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