What type of plan does not guarantee a specific payout at retirement but contributes to an employee's account based on contributions and investment performance?

A defined contribution plan is designed such that the employer, employee, or both make contributions to individual accounts for the employees. The key aspect of this type of plan is that the eventual payout at retirement is not predetermined or guaranteed. Instead, the retirement benefits depend on the amount contributed and the performance of the investments in the account over time.

For instance, if the market performs well, the account value may increase significantly; conversely, if the market underperforms, the value of the account could decrease. Employees typically have some control over how their contributions are invested, which adds an element of personal choice and risk. This structure contrasts with a defined benefit plan, which promises a specific payout amount at retirement based on factors such as salary and years of service, and thus carries a higher guarantee of income for retirees.

In summary, a defined contribution plan focuses on individual account balances influenced by contributions and market performance, rather than providing a fixed benefit at retirement.