Finance : You are vested in an underfunded defined benefit plan

Subject: Business / Finance
Question
1) You are vested in an underfunded defined benefit plan and your employer goes bankrupt. When you reach retirement age, you will:

a)not be entitled to any benefit because the plan was underfunded when it terminated

b)be entitled to a benefit from the PBGC that is approximately equivalent to what you would have been entitled to if the plan had not been terminated.

c)be entitled to a benefit from the PBGC that is lower than what you would have been entitled to before the bankruptcy.

d)receive a lump sum benefit from the PBGC based on the present value of your vested benefits.

2) Which of the following is the primary reason that firms include automatic enrollment features in their retirement plans?

a)to force employees to save for retirement

b)to ensure that they will meet nondiscrimination requirements

c)to spread the administrative costs across a wider pool of employees

d)it is a requirement for qualified plans

3) You work at a firm that uses the maximum graduated vesting schedule for its defined benefit plan. You have made contributions totaling $30,000 which your employer has matched $10,000. If you leave the firm at the end of year 6, how much of your account balance ($40,000) can you take with you?

a) $30,000

b) $32,000

c) $38,000

d) $40,000

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