Which of the following describes a modified profit-sharing or pension plan?

Prepare for the Virginia Health Insurance Exam. Utilize flashcards and multiple choice questions, each with hints and explanations, to boost your knowledge. Get exam-ready today!

The correct answer is 401(k) or 403(b) plans because these are specific types of retirement savings plans that incorporate elements of both employee contributions and employer profit-sharing. In a modified profit-sharing plan, the employer contributes to employees’ retirement accounts based on company profits, aligning employee benefits with the financial success of the company.

Both 401(k) and 403(b) plans allow employees to contribute a portion of their salary to their retirement savings, and employers may offer matching contributions or profit-sharing contributions, depending on the plan structure. This combination of employee and employer contributions, along with the tax advantages associated with these plans, makes them an integral part of many companies' benefit offerings related to retirement planning.

The other options do not fit the definition of a modified profit-sharing or pension plan. Health Savings Accounts (HSAs) are designed for medical expenses, standard life insurance policies provide death benefits rather than retirement savings, and whole life insurance plans are a type of permanent insurance that includes a cash value component, but they are not categorized as modified profit-sharing or pension plans.

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