Question

Which is true about Target Benefit Pension Plans?

1. The participant bears the investment risk.
2. Contributions differ between employees based solely on age and salary
3. The employer promises a pre-determined amount at retirement.

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

Answer 1

The correct answer is d.) 2 and 3 only. In a Target Benefit Pension Plan, the participant does not bear the investment risk. Instead, the employer promises a pre-determined amount at retirement.

Step-by-step explanation:

The correct answer is d.) 2 and 3 only. In a Target Benefit Pension Plan, the participant does not bear the investment risk. Instead, the employer promises a pre-determined amount at retirement. Additionally, contributions in a Target Benefit Pension Plan do not solely differ between employees based on age and salary. They can also differ based on factors such as years of service and job title.