Western Governors University (WGU) ACCT3650 D105 Intermediate Accounting III Practice Exam

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What is another common name for a defined benefit plan?

Pension plan

A defined benefit plan is commonly referred to as a pension plan because it is designed to provide a predetermined amount of retirement income based on a formula that typically considers factors like salary history and years of service. This type of plan guarantees a specific benefit at retirement, which is different from defined contribution plans, such as 401(k) plans, where the retirement benefit depends on how much money was contributed and the performance of the investments. The terminology "pension plan" aligns with the purpose of providing regular income during retirement, distinguishing it from other retirement vehicles that may not guarantee a specific payout.

401(k) plan

Profit-sharing plan

Health savings account

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