Question

Marleen is a 52-year-old participant in the XYZ cash balance plan. She has been a participant in the plan for the last twenty years. XYZ, which has over 10,000 employees, is having financial difficulty and Marleen is concerned about the security of her pension. Which of the following is correct? a. The cash balance plan formula cannot be lowered in the future for current participants, but could be changed for new participants. b. The cash balance plan assets may include up to 25% of XYZ stock. c. The cash balance plan and its benefits are fully protected by the PBGC. d. Termination of the plan may affect vesting for some employees, but Marleen's vesting will not be impacted.

Answer 1

d)Termination accelerates vesting, but based on Marleen's tenure, she is fully vested already.

Step-by-step explanation:

We are informed about Marleen a 52-year-old participant in the XYZ cash balance plan. we are told that She has been a participant in the plan for the last twenty years. XYZ, which has over 10,000 employees, is having financial difficulty and Marleen is concerned about the security of her pension.

In this case let us consider the given options one after the other.

OPTION A, The cash balance plan formula cannot be lowered in the future for current participants, but could be changed for new participants.

✓This wrong, here plan sponsor can decide to do some adjustments in benefits in time future.

OPTION B)The cash balance plan assets may include up to 25% of XYZ stock.

✓This is wrong, here plan sponsor's stock can have cash balance plan assets up to 10% put into it.

OPTION C)The cash balance plan and its benefits are fully protected by the PBGC.

✓This is wrong, the PBGC only protect the benefits just for annual limit and not totally.

Hence "OPTION D" which is Termination accelerates vesting, but based on Marleen's tenure, she is fully vested already is correct.