In a target benefit plan, how are contributions predominantly determined?

In a target benefit plan, contributions are primarily determined actuarially to meet established income replacement targets. This means that the plan is designed to provide specific retirement benefits based on projected future needs, typically represented as a percentage of an employee's final salary or some equivalent measure. The actuarial calculations take into account various factors, including the age and earnings of participants, to determine how much needs to be contributed to achieve the desired retirement income level.

This approach helps ensure that the contributions made are aligned with the goal of providing adequate retirement benefits, while also considering the financial realities and longevity of the plan. Actuarial assessments are essential in making these determinations because they provide the necessary statistical analysis and projections to ensure that the funding is sufficient to meet the targeted outcomes for participants.

Contrary to the other options, the contribution to a target benefit plan is not based solely on employee performance evaluations, equal distribution regardless of age, or simply linked to the total salary of the organization. Those factors may play a role in other types of plans, but in a target benefit plan, the focus is specifically on meeting actuarial targets for retirement income, ensuring that contributions are adequate for that purpose.