lecture_pensions_521_2011

lecture_pensions_521_2011 - Pension Plans Implications for...

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1 Pension Plans Implications for Workers and Firms
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You should be able to . . . Explain the difference between a defined contribution and defined benefit plan Discuss reasons that firms offer pension plans, and why employees value them Discuss the role of own company stock in pension plan portfolios 2
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3 Pension (Retirement) Plans In the U.S., many firms provide vehicles for workers to save for retirement. Social Security not sufficient for retirement, need pension plan through work as well. Pensions are a form of deferred compensation, and thus are a means to recruit, motivate, and retain employees. Also way to encourage longer job tenure, and influence retirement decision. Pensions are tax-advantaged (contributions to pensions are expensed at corporate level, and are tax-deferred at individual level).
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4 Types of Plans Defined Benefit (DB) Retirement benefit is formula-based (tied to salary and years of service) onus on employer to fund pension Defined Contribution (DC)
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lecture_pensions_521_2011 - Pension Plans Implications for...

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