Question

PBGC Insurance covers

1. Defined Benefit Pension Plans
2. Cash Balance Pension Plans
3. Money Purchase Pension Plans
4, Target Benefit Pension Plans

a.) 1 and 2 only
b.) 1 only
c.) 1, 2, 3, and 4
d.) 1, 2, and 3 only

Answer 1

PBGC insurance covers Defined Benefit, Cash Balance, Money Purchase, and Target Benefit Pension Plans, ensuring employees receive some benefits in cases of employer bankruptcy. While traditional pension plans are less common, they are being replaced by defined contribution plans like 401(k)s and 403(b)s, which allow for employee-directed investments and portability.

Step-by-step explanation:

The Pension Benefit Guarantee Corporation (PBGC) insures various types of pension plans in the event of a company's bankruptcy. It is designed to offer protection for pension insurance to employees covered under different pension arrangements. Specifically, PBGC covers:

• Defined Benefit Pension Plans
• Cash Balance Pension Plans
• Money Purchase Pension Plans
• Target Benefit Pension Plans

Based on this information, the correct answer to the question of which plans are covered by PBGC insurance is c.) 1, 2, 3, and 4. This safety net ensures that employees will receive some pension benefits, even if their employer cannot fulfill their pension obligations due to financial difficulties.

While traditional pension plans are increasingly rare, they are being replaced by defined contribution plans like 401(k)s and 403(b)s. In these plans, the employer and employee make regular contributions, and the employee directs the investment of these funds, which are portable and tax deferred, potentially offering protection against inflation.