Question

Under the provisions of a typical corporate defined benefit pension plan, the employer isresponsible for:

a. Paying benefits to retired employees.

b. Investing in conservative fixed-income assets.

c. Counseling employees in the selection of asset classes.

d. Maintaining an actuarially determined, fully funded pension plan.

Short answer

a

Step-by-step solution

Definition of pension plans 

Pension plans are strategies devised by employers for individuals to secure their future even after their productive years. They are meant to support them financially when they no longer work, i.e., at the time of retirement.

Explanation for correct option

Under the corporate pension plans, the employer is responsible for paying money to the employee post-retirement. It is payable based on the years of working, salary earned by the employees, etc. Hence the correct option is option a.

Explanation for incorrect option:

b. Pension plans are formulated to provide monetary compensation to employees at the time of their retirement and not to perform investment activities. Hence, option b is incorrect.

c. Counseling the employees with regard to investment is not the aim of a defined benefit pension plan. Advisory services are not provided and are concerned with providing money at the time of retirement. Hence, option c is incorrect.

d. A fully funded pension plan is something that is different from a defined benefit pension plan, and so option d is incorrect.