Practice Quiz

Financial Planner

Category - Retirement Savings and Income Planning

Start a Study Session Sign up for Question of the Day
What is a distinguishing feature of a cash balance plan?
  1. Low administration costs.
  2. Not covered by Pension Benefit Guaranty Corporation.
  3. Separate accounts are established for each participant.
  4. Investment risk rests on employee.
Explanation
Answer: C - A distinguishing feature of a cash balance plan is that separate accounts are established for each participant using a hypothetical account balance. These hypothetical allocations and earnings are designed to imitate the actual contributions and earnings that would occur to an employee’s account under a defined contribution plan. Employee balances grow based on hypothetical earnings. The interest rate varies from year to year and is communicated to the employee at the start of each year.
Was this helpful? Upvote!
Login to contribute your own answer or details
Start a Study Session Sign up for Question of the Day

Top questions

Related questions

Most popular on PracticeQuiz