Module 2 - Defined Contribution And Defined Benefit Structures

Question 1

defined benefit plan

Answer 1

employer provides a determinable benefit, usually related to an employee’s service and/or pay - the employer’s cost is whatever is necessary to provide the benefit specified

Question 2

defined contribution plan

Answer 2

the employer’s contribution is fixed and accumulates to provide whatever amount of benefit it can purchase

Question 3

income replacement objectives

Answer 3

could be accommodated with a defined benefit plan, depends on factors like length of participation, age at retirement, inflation, and investment results

Question 4

accrued benefit

Answer 4

a participant’s account balance

Question 5

before-tax basis

Answer 5

employee contributions made under section 401(k)

Question 6

after-tax basis

Answer 6

defined benefit plans in the private sector permit employee contributions ONLY on an after tax basis