which of the following describes a defined benefit plan? course hero

What is a defined benefit plan?

Defined benefit plans calculate annual contributions based on expected future benefits to be paid. The largest benefits will be paid to high salaried employees nearing retirement so these are the largest contributions. The smallest benefits are owed to low salary employees far away from retirement, so these are the smallest contributions.

Can a taxpayer participate in both defined benefit and defined contribution plans?

A In a given year, a taxpayer may participate in either an employer-sponsored defined benefit plan or . defined contribution plan but not both.

What is the smallest contribution to a defined benefit plan?

The smallest benefits are owed to low salary employees far away from retirement, so these are the smallest contributions. Since a defined benefit plan is a "tax qualified" retirement plan, contributions are tax deductible and earnings "build up" tax deferred.

What are the requirements of an employee benefit plan?

It must cover at least 80% of the employees. It must be funded in advance of retirement. Benefits must vest after a specified period of service, commonly five years. It must cover at least 80% of the employees.

What is the best description of a defined benefits plan?

Defined benefit plans provide a fixed, pre-established benefit for employees at retirement. Employees often value the fixed benefit provided by this type of plan. On the employer side, businesses can generally contribute (and therefore deduct) more each year than in defined contribution plans.

What is a defined-benefit plan quizlet?

Defined Benefit Plan. An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment.

What is a defined-benefit plan example?

A defined benefit plan promises a specified monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement.

What is a defined-benefit plan called?

A defined benefit plan, more commonly known as a pension plan, offers guaranteed retirement benefits for employees. Defined benefit plans are largely funded by employers, with retirement payouts based on a set formula that considers an employee's salary, age and tenure with the company.

Which of the following is true about a defined-benefit plan quizlet?

Which of the following statements is TRUE of a defined benefit plan? Under a defined benefit plan, the amount of retirement benefit is fixed and the employee knows the amount.

Who benefits most from a defined-benefit plan quizlet?

Who benefits more from a defined contribution plan? -Younger employees have longer for the money to grow. contributions may be deductible depending on income limits. -Contributions are not deductible, they are made with after tax dollars and may continue past 72 if still working.

How does defined benefit work?

Defined benefit (DB) super funds In a defined benefit fund, your super benefit when you retire is not solely dependent on super contributions and investment earnings. In these funds, your employer is required to contribute regularly towards the defined benefit you receive when you retire.

Which of the following is typically a characteristic of a defined contribution plan?

Which of the following is a characteristic of a defined contribution pension plan? The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee.

Which of the following is an example of a defined contribution plan quizlet?

Money-purchase pension plans, 401(k) plans, and qualified profit-sharing plans are all examples of defined contribution plans.

What is a defined benefit plan vs a defined contribution plan?

The basic difference is what each plan promises its participants. A defined benefit plan (APERS) specifies exactly how much retirement income employees will get once they retire. A defined contribution plan only specifies what each party – the employer and employee – contributes to an employee's retirement account.

How do defined benefit pensions work?

A defined benefit (DB) pension scheme is one where the amount you're paid is based on how many years you've been a member of the employer's scheme and the salary you've earned when you leave or retire. They pay out a secure income for life which increases each year in line with inflation.

What type of plan is a defined contribution plan?

A defined contribution plan is a common workplace retirement plan in which an employee contributes money and the employer typically makes a matching contribution. Two popular types of these plans are 401(k) and 403(b) plans.

What is an unfunded pension?

An unfunded pension liability means that expected payments from the retirement plan are in excess of the expected future assets in the plan. It is common for defined benefit pension plans to be underfunded, but the plan trustee is responsible to ensure that future funding is adequate as needed.

Does Erisa cover public sector retirement plans?

PLAY. ERISA rules cover private retirement plans to protect employees from employer mismanagement of pension funds. It does not cover public sector retirement plans, such as federal government and state government plans, since these are funded from tax collections and are closely regulated. Nice work!