Defined Contribution Plan: Key Feature & How It Works

The most likely determinative feature of a defined contribution plan is: C) The entity’s obligation under the plan is limited to the amount it agrees to contribute to the fund.

Here's why:

A defined contribution plan centers around the employer's contribution. Unlike defined benefit plans, where a specific benefit amount is promised at retirement, a defined contribution plan focuses on the money contributed and its growth over time. The employer's responsibility ends once they've made their agreed-upon contribution.

Let's break down the other options:

A) While regular contributions are common in defined contribution plans, they aren't the defining feature. Other plan types might also involve regular contributions. B) Defined contribution plans aren't limited to local governments. They're offered by various entities, including private companies and non-profit organizations. D) Defined contribution plans don't guarantee a specific benefit amount at retirement. The final payout depends on the contributions made and how the investments perform.

In essence: Defined contribution plans shift the investment risk and responsibility onto the employee, while providing flexibility and portability. Understanding this key difference is crucial for anyone planning their financial future.