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1. What is deferred compensation? : ​Deferred compensation is an arrangement in which a
portion of an employee's income is paid out at a later date
2. A pension is a ______________deffered__________________ plan where income is
given to an employee after ___retirement____________ that is given at the
_____discretion________________ of an employer. There is no _mandate________ for an
employer to fund a pension plan for employees.
3. In a defined benefit plan, the employee pension benefits are calculated based upon a
formula that may involve what? (4 things): Flat benefit formula , Career Average Formula,
Pension Benefit Guarantee
4. Who decides what investment options to take with the pension fund?: the employer
5. Do employees have individual accounts with a defined benefit pension plan? How does it
work? Yes the employe must particicpate in the plan for a certain number of years before
bieng vested or having the right to it ,
6. What does it mean to be ​vested​?: the number of years an employee must participate in
the plan before having the right to the investment or part of the investment
7. What are the two types of vesting?: cliff vesting and graded vesting
8. What are three common options available for having your pension benefits paid to you?
9. What are the 3 formulas used to calculate a pension?: FLat benefit, career-average,final
10. Most defined benefit plans are insured under a federal pension insurance program
known as what?: Pension Benefit Guaranty Corporation (PBGC)
11. What does ERISA stand for? When was it enacted?: the federal act that established
protection of pension plan and pbgc. 1974
12. What was enacted in 2006 to strengthen and protect many types of pensions?: Pension
Protection Act
13. What is COLA?: ​A cost-of-living adjustment is made to Social Security and Supplemental Security
Income to counteract the effects of inflation. Cost-of-living adjustments (COLAs) are typically equal to the
percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for
a specific period.
14. What is the CPI?: ​The C
​ onsumer Price Index​ (​CPI​) is a measure that examines the weighted
average of prices of a basket of consumer goods and services, such as transportation, food and medical
15. Read example 1 on page 458. What would Roberto's pension be if he worked for 25
years?: 1000
16. Read example 2. Roberto's latest monthly benefit is $836.90. What will it be after
another COLA of 2.13% : 17.14
17. Do problems 2 and 3 on page 461 (all parts).
2. : ​1458
3. 1000
b) ,000
c) 1015.4
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