Exam 18: Pension Funds

The Pension Protection Act of 2006 requires companies to correct funding shortfalls in their defined benefit plans within

Of the different types of defined benefit plans,plans using the final pay method will usually produce the biggest retirement benefit to employees.

How do public pension plans differ in other countries? Has privatization worked overseas?

Pension fund reserves held by life insurance companies represent about 50 percent of the typical life insurer's assets.

An employee contributes 9 percent of his salary to his 401(k)plan and the employer matches with 40 percent of the first 6 percent of the employee's salary. The employee earns $90,000 and is in a 28 percent tax bracket. If the employee earns 10 percent on the plan investments,what is his one-year rate of return relative to the net amount of money he invested?

How is Social Security different from a private defined benefit plan? When and why is Social Security projected to become insolvent?

Pension plans administered by the federal government are called insured pension plans.

A pension plan has promised to pay out $25 million per year over the next 15 years to its employees. Actuaries estimate the rate of return on the fund's assets will be 5.50 percent. What amount of pension fund reserves (to the nearest dollar)are needed for the plan to be fully funded?

You want to have $1,200,000 when you retire and you are in a defined contribution plan. You can earn 9 percent per year on the money invested and you will retire in 25 years. Your employer also contributes to your plan. The employer will contribute 4 percent of what you put into the plan each year. How much do you have to contribute per year to meet your goal?

You are 30 years old and you make $110,000 per year. You calculate that you can't retire until you have accumulated a lump sum amount of $2,000,000 to live on after retirement. You contribute 6 percent of your salary to your 401(k)and your employer contributes 3 percent of your salary. You plan on investing 65 percent of your funds in equities on which you expect to earn an average rate of return of 10 percent,and the rest in bonds projected to earn 5 percent. If your salary does not grow,how old will you be when you can retire?

A 55-year-old has just changed jobs and has a choice between a defined benefit plan [final pay] and a defined contribution plan. He will work for 10 more years. What should he consider in making his decision?

If you are married and you and your spouse make $160,000 total per year,you are not allowed to contribute to an IRA.

In general terms,which one of the following plan types is the riskiest for an employee on a year-to-year basis?

Why do employees increasingly prefer defined contribution plans to defined benefit plans?