A 401 (k) is an employer-sponsored plan where employees save for retirement. It is a Defined Contribution scheme with some advantages over Defined Benefici plans.
A defined benefit plan provides a monthly fixed amount to a retired person. The amount paid is determined by earnings, years worked and the retiree’s current age. The employer is responsible for ensuring that the employee contributes to this plan in order to meet their future obligations. The Defined Contribution carries the investment risk.