Lesson 22 & 23 Flashcards
1
Q
What is a defined contribution plan?
A
The employer agrees to contribute to a pension trust a certain sum each period, based on a formula.
This plan defines only the employer’s contribution. (401K)
2
Q
What is the purpose of the fomula used in a defined contribution plan?
A
To require an employer to contribute a certain sum each period based on the formula
3
Q
What is a defined benefit plan?
A
It outlines the benefits that employees will receive when they retire.
4
Q
What factors determine the funding level on a defined benefit plan?
A
- turnover
- Mortality
- length of employee service
- compensation levels
- interest earnings
