cpensions - PENSIONS Defined contribution plans: generally...

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PENSIONS Defined contribution plans: generally available to all employees; some percentage of employees’ pay is withheld and invested in retirement options (e.g., 401-k plans); employees’ earnings are tax deferred until withdrawn for retirement; vesting occurs in 1 to 4 years in most cases; plans are transportable after vesting occurs; these plans have grown in popularity in recent years; contribution to plans go into trust for benefit of employees; generally lack regulatory safeguards. Defined benefit plans: 360 of S&P 500 offer these plans; many companies offer both defined benefit and contribution plans; contributions to plans go into trust for the benefit of the company; vesting occurs in 2 to 5 years in most cases; plans are not generally transportable after vesting occurs; plans are heavily regulated by ERISA; plans are diminishing in use because of high level of responsibility placed on companies offering such plans brought about by federal controls; more $’s needed to run a defined benefit plan. Components of pension cost: service cost, interest cost, expected return, and
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cpensions - PENSIONS Defined contribution plans: generally...

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