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prolly named veronica or sarah
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LSDefine
Simple English definitions for legal terms
individual account plan
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A quick definition of individual account plan:
An individual account plan is a type of employee benefit plan where the employer contributes a set amount of money into an account for each employee. This is also known as a defined-contribution plan. The employee can then choose how to invest the money in their account and the amount they receive at retirement depends on the performance of their investments.
A more thorough explanation:
An individual account plan is a type of employee benefit plan where an employer contributes a certain amount of money to an individual account for each employee. The employee can then decide how to invest the money in the account. The amount of money in the account at retirement depends on the performance of the investments chosen by the employee.
Examples of individual account plans include:
- 401(k) plans
- 403(b) plans
- Individual Retirement Accounts (IRAs)
These plans are called "defined-contribution plans" because the employer defines how much money they will contribute to the employee's account, but the final amount of money in the account is not guaranteed.
For example, if an employer contributes $5,000 to an employee's 401(k) account each year and the employee chooses to invest the money in stocks, the final amount of money in the account at retirement will depend on how well the stock market performs over the years.