FinancialMarketsChap9

FinancialMarketsChap9 - Finance Chapter 9 Key Points p. 155...

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Finance Chapter 9 Key Points p. 155 1) The sponsor of a plan sets up the pension plan. It could be a business acting on behalf of its employees (corporate or private plans), the government acting on behalf of its employees (public plans), unions on behalf of their members (Taft-Hartley plans), and individuals for themselves (individually sponsored plans) 2) The employee’s contributions, a specified amount of the employer’s contributions, and the earnings of the fund’s assets are not taxed until funds are withdrawn. This allows greater growth of savings over time. p. 160 1) In a qualified pension plan, contributions (up to some extent) and earnings thereof are tax-exempt. 2) Difference between Defined-benefit and Defined-contribution plan - See definitions 3) The cash balance pension plan is a new hybrid plan that combines features of defined- benefit and defined-contribution plans p. 161 1) The largest share of both defined benefit and defined contribution pension fund assets is invested in common stocks, often a U.S. stock index 2) Qualified pension plans rarely invest in tax-exempt assets p. 162 1) The ERISA legislation stands for Employee Retirement Income Security Act of 1974. First, it established funding standards for the minimum contribution that plan sponsors
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FinancialMarketsChap9 - Finance Chapter 9 Key Points p. 155...

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