Which type of retirement plan would best meet Fresh Munchables' needs for a cost-effective benefit?

The best choice for Fresh Munchables seeking a cost-effective retirement benefit is a defined contribution plan. This type of plan allows employers to contribute a specific amount of money into employee accounts, often with employees having the option to make additional contributions. The total retirement benefit depends largely on the performance of the investments chosen by the employee, which places some of the risk on the employee rather than the employer.

Defined contribution plans typically have lower administrative costs than defined benefit plans, as they do not require the employer to calculate and guarantee a specific payout at retirement. Since the benefit is based on contributions and investment performance rather than a predetermined formula, it offers more flexibility for the employer, making it a more cost-effective option.

In contrast, defined benefit plans require employers to manage investment risks and ensure that so-called promised benefits are met, often leading to higher and less predictable costs. Individual retirement accounts (IRAs) are primarily individual accounts and would not serve the company's needs as a group benefit. Profit-sharing plans can fluctuate significantly based on company performance, adding layers of unpredictability to the cost for the employer.

By choosing a defined contribution plan, Fresh Munchables can provide a valuable benefit to its employees while managing costs effectively.