Massachusetts State Life Insurance Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Study for the Massachusetts State Life Insurance Exam. Use our flashcards and multiple choice questions, each with hints and explanations. Prepare confidently for your test!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which factor does NOT influence contributions in defined contribution pension plans?

Employee's age
Years of service
Compensation level
Company profitability

The correct answer is: Company profitability

Defined contribution pension plans are typically influenced by employee-specific factors such as the employee's age, years of service, and compensation level. Contributions to these plans are often based on a percentage of the employee's earnings, which directly ties the level of contributions to their compensation. Additionally, older employees may be able to contribute more due to catch-up provisions, and the years of service may determine what percentage, if any, the employer contributes on behalf of the employee. Company profitability, while important for overall business operations and potentially affecting employee bonuses or other compensation methods, does not directly influence the contribution amounts in a defined contribution plan. Once the contribution percentage is set of employee earnings, the company's financial performance does not affect the predetermined contributions made to the plan, making it independent of profitability. This is a key distinction in understanding how defined contribution plans operate compared to a defined benefit plan, where company performance might directly affect funding obligations.