Certified Payroll Professional Practice Exam

Question: 1 / 400

Which type of plan is described as employer-sponsored with benefits based on a formula?

Cafeteria Plan/Sec 125

Defined benefit plan

A defined benefit plan is the correct answer because it is an employer-sponsored retirement plan where benefits are based on a specific formula, such as years of service and salary history. This type of plan guarantees a specified monthly benefit at retirement, providing employees with a predictable income stream.

The other options are not the correct answer:

- A cafeteria plan/Section 125 and qualified plans are types of employee benefit plans but do not specifically have benefits based on a formula.

- Defined contribution plans, unlike defined benefit plans, do not guarantee a specific benefit amount at retirement and instead rely on contributions and investment performance to determine the final account balance available to employees at retirement.

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Defined contribution plan

Qualified plan

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