Massachusetts Life Insurance Practice Exam 2025 – Complete Study Guide

The reason "Contributions may vary depending on company success" is not a typical feature of employer-sponsored pension plans is that most pension plans are structured with a fixed contribution policy. In traditional defined benefit pension plans, the employer commits to making specific contributions to fund the plan, regardless of the company's performance. This ensures that benefits can be provided to employees based on predetermined formulas that consider factors such as years of service and salary history.

In contrast, while some also have features that can align with company performance, those are more characteristic of defined contribution plans, such as 401(k) plans, where the employer may match contributions in a variable manner based on profitability or business conditions. However, the foundational structure of pension plans is designed to provide stability and predictability for employee retirement benefits, differentiating them from more performance-sensitive retirement savings options.