Which of the following statements about defined contribution plans is true?

Defined contribution plans are characterized by benefits that are based on the investment returns accumulated in the individual accounts of participants. Each participant has their own account where contributions are made, typically by both the employees and employers, and these contributions are invested in various assets. The final benefit at retirement depends on the amount contributed and the performance of those investments over time.

This structure fundamentally differs from defined benefit plans, which guarantee fixed benefits that are determined based on factors like salary history and years of service. Because defined contribution plans lack this guarantee, the eventual retirement benefit can fluctuate based on market performance, making option B accurate.

The other statements do not align with the nature of defined contribution plans. For instance, stating that employee contributions are optional is misleading as many plans require some level of employee contribution to benefit from employer contributions. Similarly, benefits being calculated based on salary history is true for defined benefit plans, not defined contributions. Lastly, the notion of fixed benefits applies specifically to defined benefit plans, which directly contrast with the variable nature of defined contribution plans.