What is true about a Defined Benefit Pension Plan (DBPP)?

A Defined Benefit Pension Plan (DBPP) is designed to provide a specific benefit amount to employees upon retirement, which is predetermined based on factors such as salary history and years of service. The salient aspect of a DBPP is that it can indeed be structured as either contributory or non-contributory.

In a contributory DBPP, both the employer and the employee contribute to the plan. The employee’s contributions often come from their wages, and the employer typically matches or adds to these contributions to ensure the promised benefit amounts are funded adequately.

On the other hand, in a non-contributory DBPP, the employer solely funds the plan without requiring any contributions from the employees. This means the employees are not responsible for contributing a portion of their salaries to receive the promised retirement benefits, making the plan a significant incentive for staff retention and recruitment.

Thus, the correct answer acknowledges the flexibility of a Defined Benefit Pension Plan in terms of funding, illustrating that it can be tailored to structure contributions according to the organization’s policies and workforce needs.