Massachusetts State Life Insurance Practice Exam

When participating in a defined contribution pension plan, employees can typically expect that their contributions will increase with longer service time. This can occur through mechanisms such as employer matching contributions that may increase with tenure, or employees may elect to increase their own contribution percentages as they advance in their careers.

In a defined contribution plan, the retirement benefits are based on the contributions made and the investment performance of those contributions. Therefore, while employees may benefit from longevity in their job leading to higher contributions, there is no guarantee of fixed retirement benefits. Each individual's retirement savings can significantly vary based on how much they contribute, investment choices, and market performance. This structure emphasizes the employee's responsibility for their retirement savings, contrasting sharply with defined benefit plans, which promise a specific payout at retirement based on salary and years of service.