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Which type of plan is described as employer-sponsored with benefits based on a formula?
Cafeteria Plan/Sec 125
Defined benefit plan
Defined contribution plan
Qualified plan
The correct answer is: Defined benefit plan
A defined benefit plan is the correct answer because it is an employer-sponsored retirement plan where benefits are based on a specific formula, such as years of service and salary history. This type of plan guarantees a specified monthly benefit at retirement, providing employees with a predictable income stream. The other options are not the correct answer: - A cafeteria plan/Section 125 and qualified plans are types of employee benefit plans but do not specifically have benefits based on a formula. - Defined contribution plans, unlike defined benefit plans, do not guarantee a specific benefit amount at retirement and instead rely on contributions and investment performance to determine the final account balance available to employees at retirement.