What is a correct statement regarding the employer's contributions to a defined benefit plan?

The statement regarding employer contributions to a defined benefit plan that is correct is that higher investment returns lead to lower required contributions. In a defined benefit plan, the employer is responsible for ensuring that there are sufficient funds to pay out the promised benefits to participants upon retirement. The plan's funding requirements are influenced by several factors, including the performance of invested assets.

When investment returns are higher than expected, the assets in the plan grow more quickly, which may lessen the need for the employer to contribute as much money into the plan. This is because the returns can help to cover the liabilities of the plan without necessitating additional contributions. Conversely, if investment returns are lower than expected, the employer may need to increase contributions to ensure that they can meet their obligations to plan participants.

Understanding this relationship helps clarify the dynamics of funding requirements in a defined benefit plan and illustrates why strong investment performance is beneficial for both the plan and the employer's financial responsibilities.