3 - Retirement Plan Design Flashcards
Specific objectives that the employer could have concerning the cost of a retirement plan include: (4)
- contribution flexibility
- willingness to assume the costs associated with future inflation
- need for a cost-efficient retirement program
- desire to maximize benefits and contributions within the limits permitted by federal tax law.
A _________approach, though, might suggest the use of a defined contribution plan as the basic program for providing retirement benefits. Here the emphasis is on deferred compensation and the potential for asset accumulation.
compensation-oriented
An efficient retirement plan design requires the identification of all sources of benefits for a retired employee. What plans should be considered as a potential source of benefits? (4)
- employer’s retirement plan
- social security
- 401k
- group life and medical
The employer’s attitude on who should bear investment and inflation risks—the employer or the employees—can play a significant role in the choice between these.
In a ______, all risk assumed by employer
In a ______, emplyee assumes all risk
defined benefit
defined contribution
Typically, employers set income-replacement objectives with several factors in mind: (4)
- usually take the employee’s (but not the spouse’s) ________ into account.
- objectives usually are _____ for lower paid employees than for higher paid employees.
- objectives usually are set for the employee’s pay level during ___________
- Full income-replacement objectives are set only for individuals who have completed what the employer considers to be a _______ of employment.
(important)
- Social Security benefits
- higher
- the final year of employment
- “career”
many employers believe employees should share in the cost of meeting their own economic security needs. this type of employee involvement in a private retirement plan may take two alternative forms
- direct employee contributions
- indirect ways
If an employer wishes to achieve maximum tax advantages for a retirement program, this can find expression in many ways, such as: (6)
- benefit ______
- degree of integration with ________
- level of _______ needed
- funding ______ chosen
- ______of both a defined benefit and a defined contribution plan
- use of a ______ plan
(important)
- formulas
- Social Security benefits
- funding
- instrument
- adoption
- target benefit
A high degree of concern on the part of an employer about the need for maintaining controls over future cost levels might lead to the selection of a _______ or a _________ retirement plan.
- career-pay
- defined contribution
An _____ approach could suggest the choice of a defined benefit pension plan integrated to the maximum extent with Social Security benefits or the choice of a death benefit that provides an income benefit but only to survivors of the employee’s immediate family. Here the emphasis is on protection and continuation of a certain income level when active employment ceases.
income-maintenance
Why might it be advantageous for an employer to provide a retirement program for executives that differs from that provided for its employees in general?
it may be difficult for a firm to recruit a needed executive in midcareer because of the loss of pension benefits he or she would experience
many employers believe the presence of an adequate benefit program is not a ____ influence in their efforts to attract and retain employees—at least to any significant extent. Rather, these employers reason the absence of such a program could have a ______ effect on their recruiting and retention efforts.
positive
negative
Many employers have a preference for measuring their plans against industry standards. However, measuring against industry standards is most appropriate for ______ and for _________—those whose capabilities are more related to the employer’s own industry.
skilled or professional workers
management staff
A great many employers believe that, because of the very nature of Social Security bene ts and their relatively larger value for lower paid employees, it would be impossible to achieve an equitable balancing of benefits and costs for employees at all pay levels without integrating _____and _______ in some fashion with the benefits provided by Social Security.
retirement and disability income plans
The three techniques that may be used to establish the relative standing of various retirement plans are:
- Compare the benefits _______ to representative employees under different circumstances under the various plans.
- Compare ______ to the employer for the different retirement plans.
- Measure plans on a basis that uses __________ and assumptions and focuses on the relative value of the different bene ts provided.
- actually payable
- actual costs
- uniform actuarial methods
Environmental factors that should be taken into consideration in the retirement plan design process include (6):
- The employer’s _____ status.
- The basic ______ of the employer and its industry
- The characteristics of the ______ employed by the employer
- Employers with ______
- The size of the _______ in which the employer does business
- The presence of _________
- legal
- characteristics
- individuals
- diversified operations
- community
- collective bargaining units