Question 8 Mandatory 4 points For a defined benefit plan whi

Question 8 (Mandatory) (4 points) For a defined benefit plan, which of the following is correct? The plan requires that the pension expense and the cash funding amount be the same. The plan defines the benefits that the employee will receive at retirement. The plan requires that the employee bears the risk of loss or benefit of gain from assets contributed to the plan. The plan defines the contribution the employer is to make, with no promise concerning the ultimate payout to employees. Save Save Next Page Page 8 of 27

Solution

The answer is “the plan defines the benefits that the employee will receive at retirement”.

The future benefit is determined by using a specific formula. A nominal level of benefits is provided on retirement and the benefit is determined by factors like length of service as well as earnings of the employee. Risk of loss is borne by the employer.