M8: Flashcards
What a defined benefit plan provides
Specified amount of benefits at retirement
- Systematic withdrawal program from invested assets in a plan
- Guaranteed lifetime annuities
- Temporary payout from plan assets to delay taking Social Security benefits
Retirement Income Generator (RIG) options
This agency reported that most older workers don’t have access to retirement income solutions in their 401(k) plans.
Government Accounting Office (GAO)
They provide retirement income to individuals starting at an advanced age.
Qualified Longevity Annuity Contracts (QLACs)
A challenge for older workers trying to generate lifetime retirement
Retirement savings may have to last 20-30 years
A rule requiring participants start taking annual distributions from their retirement accounts at age 73 in 2023, age 75 in 2033
Required Minimum Distributions (RMDs)
DC plans
Traditional IRA’s
403(b)
Governmental 457(b)
Type of plans eligible for QLACs
The maximum age at the beginning of a QLAC
Age 85
The maximum premium for a QLAC
Under SECURE 2.0, $200,000 (indexed to cost of living in 2024)
Investments to be made with skill, prudence, and diligence
Prudent man theory
This theory constructs a risk/return frontier that assumes diversification always eliminates non-systematic risk.
Modern Portfolio Theory (MPT)
Rendering of investment advice for a fee or other compensation
A 3(21) arrangement
Entity that has the authority to make investment decisions
A 3(38) arrangement
A type of fund that seeks to match an index of securities
Passive investment funds
A type of funds that may outperform the market
Active investment funds
Pooled investment funds offered by a bank
Collective investment trusts
How do closed-ended funds redeem their shares?
Closed-ended funds typically do not redeem their shares.
Separate accounts that invest directly in stocks, bonds or other types of individual security in lieu of a pooled fund
White label funds
Generally encompasses private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts and often real estate.
Alternate investments
What type of shares do mutual funds issue?
Mutual funds issue redeemable shares.
The regulation that primarily addresses the provision of services between a plan and a party in interest, ensuring that such arrangements are reasonable and necessary for the operation of the plan and that no more than reasonable compensation is paid for the services.
Section 2550.408b-2
