ADMS 3490 Chapter Notes - Chapter 12-13: Defined Benefit Pension Plan, Canada Pension Plan, Pension

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peachcaribou418

30 Jan 2016

School

York University

Department

Administrative Studies

Course

ADMS 3490

Professor

Parbudyal Singh

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Document Summary

People are going to google for less pay just for benefits. Sas a software company; the physical lay out is appealing so does. Mandatory benefits: have to pay these such as pension plans, employment insurance. Government-provided employee benefits, such as pensions and employment insurance to which employers must contribute on behalf of their employees. Retirement income: three types of retirement plans; i). Defined benefit plan: where the retirement income is not guaranteed as the employer invests the pension saving. Pension plans that provide retirement income based on a proportion of the employee"s pay at the time of retirement ii). Defined contribution plans: pension plans which provide retirement income based on the accrued value of employer and employee contributions to the plan iii). Hybrid pension plans: some of it is guaranteed and some of its on the market. Pension plans that combine features of the defined benefit pension plan and the defined contribution pension plan.

Related Questions

Pension plans provide a savings plan for employees that can be used for retirement. The amount of money in the fund grows in four ways: (1) new contributions by the employee, (2) new contributions by the employer on behalf of the employee, (3) dividends or interest earned by the fund due to its investment in equity or debt securities, and (4) appreciation in the values (capital gains) of the securities in which the fund has invested. In aggregate, most of the contributions come from the employer. Pension funds are major investors in stocks, bonds, and various types of loan packages such as mortgage-backed securities.

What role do you think insurance companies play when it comes to pension funds and financial planning?

Explain the differences between diversification and asset allocation.

Which is more important in portfolio management?

whitejackal625

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

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

ADMS 3490 Chapter Notes - Chapter 12-13: Defined Benefit Pension Plan, Canada Pension Plan, Pension

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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