Which statement is true about the investment risk in target benefit pension plans compared to money purchase pension plans?

In target benefit pension plans, the investment risk primarily falls on the employees, similar to money purchase pension plans. In both plan types, contributions are defined, but the final benefit depends on the investment performance of the assets. Employees in these plans often have individual accounts where contributions are made, and the returns on investments directly affect the retirement benefits they ultimately receive.

In the context of this question, it is important to understand that neither plan allows the employer to absorb all investment risks. In target benefit plans, while there may be features that aim to stabilize benefits, they do not eliminate the inherent risk associated with fluctuating investment returns, meaning that employees are still exposed to that risk. Additionally, in both plans, if investments perform poorly, the employees could end up with insufficient funds for retirement, affirming that they indeed bear the investment risks associated with these plans.