Defined contribution plans are used by more U.S. employers than any other type of qualified retirement plan. The number of private-sector employees participating in defined contribution plans (excluding plans that cover one participant only) grew from approximately 50.8 million in 2000 to approximately 75.3 million in 2014 (see www.dol.gov/ebsa). The total number of private-sector defined benefit plans (excluding plans that cover one participant only) decreased from 686,878 in 2000 to 640,334 in 2014 (see www.dol.gov/ebsa). Total assets held by private sector defined contribution plans increased from $2.241 trillion in 2000 to $5.321 trillion in 2014 (see www.ici.org). For decades, there has been a steady increase in the number of workers participating in defined contribution plans, and a steady decrease in the number of workers participating in defined benefit plans.

Furthermore, as of 2017 according to the Bureau of Labor Statistics, 58% of private industry workers have access to a defined contribution plan. However, only 44% of private industry workers participate in a defined contribution plan. Defined contribution plans come in many forms, each having different advantages and disadvantages for both employers and employees. Furthermore, many operate under unique sets of rules.

Qualified plans may be broken into pension plans and profit-sharing plans. Profit sharing plans are a type of defined contribution plan, and these are the focus of this module.

Complexity Level: Intermediate