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Quiz22009&solutions - AS 4426F Quiz 2 Nov 12th 2009...

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AS 4426F Quiz 2 Nov 12 th , 2009 AND SOLUTIONS Name _______________________ ID_______________ This test will be marked out of 20 Please start a new page for each question and clearly label each question part. The mark breakdown can be used as a guide as to how many minutes to spend on each question part. Question 1(12 marks-please us a pen for this question ) a) (8 Marks ) Describe some of the challenges facing Defined Benefit plans and Defined Contribution plans today? (ILLUSTRATIVE SOLUTION ) DB; - cumbersome regulation,(also, perception of inequitable treamtment of surplus vs. deficicts), and administration - poor returns and shrinking equity premiums - funding deficits - increased longevity increasing costs - changing demographics-employee loyalty and priorities have changed - for some/all of above reasons employers have shied away from DB plans (rising costs, unpredictability), next to no new DB plans in last decade, many DB plan conversions DC; - low returns have impacted these plans especially for members at or or near retirement -
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