Which of the following characteristics describe defined benefit plans? (Check all that apply)

The target-benefit pension plan has the following characteristics:

• The contributions paid by the employer and the benefit target level are provided for in the plan's provisions.
• The plan's obligations are to be borne by the members and beneficiaries. This means that these persons are responsible for subsequent deficits of the plan.
• In the case where contributions provided for are insufficient, the benefits related to credited service, including the pensions in payment, may be reduced based on the recovery measures set out in the plan's provisions without having an amendment made to the plan and without the consent of members and beneficiaries.
• The surplus assets belong to members and beneficiaries.

The Supplemental Pension Plans Act provides for circumstances giving rise to the application of recovery measures. The provisions of a target-benefit pension plan must specify the measures that will be applied, their objective and the conditions and procedure. They must also provide for circumstances giving rise to the restoration of benefits or the use of surplus assets, as well as the procedure for applying them.

The actuarial valuation report determines whether recovery measures must be applied or if restoration of reduced benefits or an appropriation of surplus assets can be made.

The actuarial valuation report must show the sufficiency of contributions and must describe the plan's financial situation, taking into account the recovery measures applied, the restoration of benefits made or the surplus assets used, if applicable.

The benefit target level

The benefits provided for in the provisions of a target-benefit pension plan constitute the target level to meet. The benefits that members and beneficiaries receive can, in certain circumstances, be less than the plan's target level.

The target level of a target-benefit pension plan is not limited to a normal retirement pension 

Restrictions on benefits

A target-benefit pension plan cannot provide for the following benefits:

• a pension based on the final average salary or the average of the highest salaries
• an automatic indexation of the pension after retirement, except if it is an indexation established based on a fixed rate
• a benefit payable only when a plan is terminated
• a subsidy for early retirement based on the years of service.

Note that...

If the plan provides for advantages for an early retirement or the indexation of a pension before retirement, all members ceasing their active membershipmust benefit from it.

Other restrictions

Other restrictions apply to target-benefit pension plans. Among other things, a plan that has target‑benefit provisions cannot:

Conversion of a plan into a target-benefit pension plan

It is forbidden to convert a defined-benefit plan or defined benefit-defined contribution pension plan into a target‑benefit pension plan. However, it is allowed to convert a multi-employer negotiated contribution pension plan into a target-benefit pension plan.

Sufficiency of contributions

In the case of a target-benefit pension plan, the contributions that must be paid into the pension fund are the ones provided for by the plan's provisions. However, they must satisfy 2 sufficiency tests:

1. Cover the current service contribution including the current service stabilization contribution.
2. Cover the required amortization payments, if applicable.

If the sufficiency tests fail, a recovery must be carried out, based on the measures planned for each test.

Legal references

• Sections 7.1, 14, 22, 106, 146.44.1 to 146.44.3, 146.9.1.4, 146.45 to 146.48, 146.52, 146.53, 146.58, 146.72, 146.75 to 146.77, 146.79, 146.84, 146.101, 194.1 of the Supplemental Pension Plans Act 
  

WEEK 2 – PRACTICE CHAPTER 13Which of the following choices is a characteristic of a qualified retirement plan?The plan may NOTdiscriminate against the rank-and-file employees.Which of the following statements is INCORRECT regarding defined benefit plans for 2019?The level ofbenefits is a function of how well the funds were invested and the market growth over the employee'sworking years.The process of becoming legally entitled to retirement benefits is known asvesting. The most restrictiveschedule for this process for defined benefit plans is either afive-year "cliff" or aseven-year graded schedule.

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Which of the following issues are characteristic of defined benefit plans?

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Funding costs are typically more significant for defined benefit plans than other types of plans.Qualified retirement plans can NOTdiscriminateagainst non-executives.The employee bears the investment risk and funding responsibility in a definedcontributionplanSteve retired at the beginning of 2019. He worked for a company with a defined benefit plan. The planprovides for retirement benefits at a rate of 2% of the last three years' average compensation for every year ofservice. Steve had worked for this company for 30 years when he retired. His average salary for the last threeyears was $400,000. The maximum benefit Steve can receive from his retirement plan in 2019 is$225,000One nice feature of an account such as a 401(k) is that many employers willmatchthe employee contributionsat a stated percentage of the contribution.Mike just started working for a company that maintains a defined benefit retirement plan. If Mike terminateshis employment within the first two years, he forfeits his retirement. If he stays for three years, he will beentitled to receive all of the funds provided to him in the account. What type of vesting schedule is used atMike's company?ClifIn 2019, for taxpayers under age 50 at year end, the sum of the employee and employer contributions to anemployee's defined contribution account(s) is limited to the lesser of56,000or100percent of the employee'scompensation for the year. Furthermore, the employee contributions are limited to$19,000.Upon retirement, all distributions from defined benefit plans are taxable asordinaryincome.What type of retirement plan typically requires a significant amount of work to track employee benefits and tocompute required contributions; is structured where the employer bears the investment risk; and combinesthe funds, rather than having each employee with a separate accounts.A defined benefit plan

Which statements characterizes defined benefit plan?

Which of the following is a characteristic of a defined benefit pension plan?

What is a defined benefit plan quizlet?

What are characteristics of defined contribution plans quizlet?