MHR 749 Lecture Notes - Lecture 7: Retirement Age, Life Insurance, Sick Leave

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20 Nov 2018

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Indexation pension income can be adjusted up to accommodate for increased cost of living. Life insurance: group life insurance, accidental death and dismemberment insurance, dependent life insurance direct, spouse, kids, optional, employee-paid insurance, retiree life insurance do you pay for life insurance for your retirees. Employer-sponsored medical plans: cover expenses not payable under provincial or territorial plans, prescription drug coverage considered most important benefits by employees, can include dental, vision, and hearing coverage, medical cost control is biggest issue facing benefit managers today. Flexible benefits programs: employees choose packages that best satisfy their unique needs, help firms meet the changing needs of a changing workforce, makes introduction of new benefits less costly; new option is added merely as one. Pay for time not worked: breaks from work, commute time, vacations and holidays, leaves and sabbaticals, bereavement leave, jury duty, floater days, community volunteering.

Related Questions

Match the following terms to the appropriate definition.

_____ a. Cost-sharing multiple employer plan

_____ b. Defined contribution plan

_____c. Entry age actuarial cost method

_____ d. Other postemployment benefits

_____ e. Total pension liability

1. Employee takes on investment risk for this retirement plan.

2. Type of plan in which employees of all participating governments are placed in a common pool. The employees share all risks and costs and make contributions at the same rate.

3. Retirement benefits other than pension, such as medical, dental, vision, and hearing benefits.

4. Actuarial cost method required by GASB.

5. The sum of the net pension liability and net plan assets

maroongoose379

1. Which of the following statements about defined contribution plans is incorrect?

a. In general, employees can choose the investment vehicle under a defined contribution plan. Thus, highly risk-averse employees can choose low-risk investments, while more risk-tolerant employees can choose high-risk investments.

b. In a defined contribution plan, the employer must make larger-than-average contributions to the pension plan when investment returns have been below expectations.

c. Defined benefit plans are used more often by large corporations than by small companies.

d. The PBGC insures a portion of pension benefits.

e. A defined contribution plan places the risk of poor pension portfolio performance on the employee.

2. Which of the following statements about pension plan portfolio performance is incorrect?

a. Alpha analysis, which relies on the Capital Asset Pricing Model, considers the risk of the portfolio when measuring performance.

b. Peer comparison examines the relative performance of portfolio managers with similar investment objectives.

c. A portfolio annual return of 12 percent from one investment advisor is not necessarily better than a return of 10 percent from another advisor.

d. In managing the retiree portfolio, fund managers often use immunization techniques such as alpha analysis to eliminate, or at least significantly reduce, the risk associated with changing interest rates.

e. Pension fund sponsors must evaluate the performance of their portfolio managers periodically as a basis for future asset allocations.

3. Ms. Lloyd, who is 25 and expects to retire at age 60, has just been hired by the Chambers Corporation. Ms. Lloyd's current salary is $30,000 per year, but her wages are expected to increase by 5 percent annually over the next 35 years. Chambers has a defined benefit pension plan in which workers receive 2 percent of their final year's wages for each year of employment. Assume a world of certainty. Further, assume that all payments occur at year-end. What is Ms. Lloyd's expected annual retirement benefit, rounded to the nearest thousands of dollars?

a. $35,000

b. $57,000

c. $89,000

d. $116,000

e. $132,000

blackdolphin35

Question 1

Life insurance is viewed as favorable in defined benefit plans because it adds to the limit on deductible contributions

True

False

2 points

Question 2

Some of the advantages of using life insurance in a qualified plan includethe following except:

		plan costs for employer are predictable
		life insurance is considered to be a very safe investmen
		greater rates of return on insurance cash value than alternative investments
		retirement benefits can be guaranteed by both the insurance company and employer
		low cost installation and service of the plan

2 points

Question 3

A defined benefit plan can help an older employee in a small business maximize tax-deferred savings.

True

False

2 points

Question 4

IRS sets a maximum limit on the projected annual benefit that a defined benefit plan can provide a participant.

True

False

2 points

Question 5

An employee can be covered under both a defined benefit and a defined contribution plan.

True

False

2 points

Question 6

Which type of plan has benefit levels that are guaranteed by the employer and also the Pension Benefit Guaranty Corporation (PBGC)?

money purchase plan

defined benefit plan

target benefit plan

cross tested plan

tax deferred annuity

2 points

Question 7

Regarding a cash balance plan, which of the following is (are) true?

		the employee bears investment risk
		each participant has a hypothetical account that the employer credits at least annually
		the plan benefits older workers more than younger workers
		1 and 3
		2 and 3

2 points

Question 8

A traditional defined benefit plan and a cash balance plan share the following characteristics:

Pension Benefit Guaranty Corporation coverage

employer bears investment risk

able to use Social Security integration

all of these

only 1 and 2

2 points

Question 9

If an employer wants to reward an employee

MHR 749 Lecture Notes - Lecture 7: Retirement Age, Life Insurance, Sick Leave

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Related Questions

		money purchase plan
		defined benefit plan
		target benefit plan
		cross tested plan
		tax deferred annuity

		Pension Benefit Guaranty Corporation coverage
		employer bears investment risk
		able to use Social Security integration
		all of these
		only 1 and 2