Which of the following statements about qualified retirement plans is NOT correct?

The statement that a plan guaranteeing a benefit of 2% of salary for each year an employee participates in the plan is a defined benefit plan is indeed correct, not incorrect, which is why it’s essential to clarify the characteristics of defined benefit plans. Defined benefit plans provide a predetermined payout at retirement, and this amount is typically based on the employee's salary and years of service. In this case, specifying a benefit of 2% of salary for each year of participation directly aligns with the criteria that define a defined benefit plan.

Understanding that defined benefit plans are designed to offer a specific benefit rather than just relying on contributions made during the employee's career highlights their structure and purpose. They are distinct from defined contribution plans, which account for contributions made and investment growth but do not guarantee a specific benefit amount upon retirement.

Recognizing the nuances between the two types of qualified retirement plans is important for grasping the overall landscape of retirement funding options. Therefore, the statement regarding the defined benefit plan is indeed a proper correlation, and acknowledges the correct classification based on the benefit description provided.