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LOS a, (Part 2): Discuss the advantages and disadvantages of a defined-benefit plan and a defined-contributuion plan.
Q1. Which of the following is a characteristic of a defined-benefit pension plan?
A) Contributions to the plan are typically a percentage of plan participants current pay.
B) Defined benefit plans are less expensive to administer and young employees like the portable nature of their contributions.
C) Plan sponsors bear all investment risk. They are liable for shortages and have a claim against excess returns.
Q2. A defined benefit plan differs from a defined contribution plan in that the:
A) benefit paid by the sponsor is defined by contributions made to the plan.
B) risk/return tradeoffs of plan assets accrue to the plan sponsor.
C) risk/return tradeoffs of plan assets accrue to the participant.
Q3. A defined contribution plan differs from a defined benefit plan in that the:
A) risk/return tradeoffs of plan assets accrue to the participant.
B) investment decisions are made by the plan sponsor.
C) risk/return tradeoffs of plan assets accrue to the plan sponsor.
Q4. Which of the following is a characteristic of a defined-contribution pension plan?
A) Up to a maximum limit, the Pension Benefit Guaranty Corp (PBGC) insures plan contributions.
B) Benefits are based on specific formulas relating to employee earnings or length of service.
C) Investment risk of plan assets is shifted to the individual. | 
发表于 2009-3-4 16:02
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