What is one potential risk of contribution plans for employees?

One potential risk of contribution plans for employees is the issue of insufficient funds for retirement due to market fluctuations. Since contribution plans, such as 401(k)s or IRAs, are typically invested in various market securities, their value can significantly fluctuate based on market conditions. If the market experiences a downturn, the value of the investments may decrease, which could lead to a situation where employees end up with less money for retirement than they had anticipated. This risk is particularly pronounced as individuals are responsible for their investment choices and the performance of those investments directly affects their retirement savings. Employees may also not have the expertise to manage these investments effectively, further compounding the risk of not having adequate funds at retirement.

In contrast, the other options do not accurately reflect risks associated with contribution plans. Guaranteed benefits typically pertain to defined benefit plans, not contribution plans, where employees receive benefits based on a predetermined formula. Legacy funds for beneficiaries being required is not a common feature of contribution plans; employees usually have the flexibility to designate beneficiaries. Lastly, fixed contribution amounts can be defined by the employer's plan but are not an inherent risk of contribution plans themselves—employees may have the option to vary their contributions within certain limits.