Question

Which of the following statements is false regarding pension funds companies?

	a.	Under defined-contribution plan, amount of sponsor’s (employer’s) contribution is fixed but benefits vary
	b.	Under defined-benefit plan, amount of sponsor’s (employer’s) contribution varies but benefits are fixed
	c.	Collect small insurance premiums from employees and make payments to those employees who suffer irregular losses
	d.	Accumulate funds to provide retirement payments to the company employees

Answer 1

Ans : A defined-benefit plan is an employer-based program that pays benefits based on factors such as length of employment and salary history.

Pensions are defined-benefit plans.

In contrast to defined-contribution plans, the employer, not the employee, is responsible for all of the planning and investment risk of a defined-benefit plan.

Benefits can be distributed as fixed-monthly payments like an annuity or in one lump-sum payment.

B part : In which employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements. The sponsor company will, at times, match a portion of employee contributions as an added benefit. These plans place restrictions that control when and how each employee can withdraw from these accounts without penalties.

C part : The majority of the insurers will offer the coverage till 75 years (as it is the average age of a person). There are a few life insurance companies which provide coverage for 100 years as well. So, if you buy a term plan at an early age, you and your family can enjoy its benefits for a long time.Free Lookup Period,Tax saving,Ease of Payments.

D part : Pension accumulation for employees in pension funds is a means companies all around the world often use to foster employee loyalty.

Calculations

Allocatingthe same amount of money for an employee incentive and considering all the costs, a pension fund contribution counting from 2019 could be as much as 68% bigger than the after-tax amount of a salary bonus.It doesn’t exceed a quarter of the employee’s pre-tax salary for the year.

Thus contributing to a pension fund lets an employer allocate a much bigger incentive amount in terms of what they add to an employee’s supplementary pension accumulation