Ch. 15 Cash Balance Pension Plan Flashcards
Cash balance pension plan
a qualified defined benefit plan that provides annual employer contributions at a specified rate to “hypothetical” individual accounts that are set up for each participant
What does the employer guarantee?
Contribution level
Minimum rate of return on each acct
Used when an employer has ____ employees
young
Used when employees are concerned with the security of their ___ ____
retirement income
used when the employer has a ___ workforce and most are ____-income
large; middle
Would it be used if the employer whats to spread admin costs over a relatively large group of employees?
yes
Used when the employer wants to convert an existing defined benefit plan to a plan that….
provides more attractive benefits to younger employees and may lower costs to older employees
Is the plan guaranteed by the PBGC?
yes
are there tax-deferred savings for employees?
yes
Some older employees may be able to use ___ year averaging
10
Does the employee bear investment risk?
No
Plan benefits are easily ___ by employer and easily ___ by employees
communicated;understood
3 disadvantages
- retirement benefit may be inadequate for older plan entrants
- complex to administer
- employer bears investment risk which increases costs
There is a _____ _____ account for each participant
“hypothetical” individual
At least annually, the employer makes what two types of credits to a pooled single fund?
Pay credit
Interest credit
