1. Describe three criteria used to qualify pension plans for preferential tax treatment.
I. profit-sharing plan: it refers to any plan in which a portion of the organization’s profits are set aside to get distributed to the employees that undergoes qualification under the plan.
II. money-purchase plan: it entails a plan in which contributions equals the fixed portion of the employee’s income. The employee’s benefits get offered in whatever amount the contributions will provide for them, be it accumulated, or the current one.
III. Stock bonus plan: It entails criteria under which bonuses get paid to the workers as stock shares.
2. Are employees more likely to favor defined contribution plans over defined benefit plans? How about employers? Explain your answer
There is a possibility for the employees to go for the defined contribution plans instead of defined benefit plans. On the other hand, a lot of the employers are likely to go for the defined benefit plans instead of the defined …show more content…
This group of employees usually pays and interest credits under the cash balance plan during their remaining working years, and it possible that it is unlikely to develop into a retirement benefit that equals their projected retirement earnings, as it would be, under the traditional plan of payment. All these aspects are as a result of various design parameters belonging to the new, as well as old plans, together with the types of the grand fathering offerings. Those workers with a certain age, yet working under the same employee tend to get a lower form of benefit accruals of the period of the average pay plan, as compared to the final average pay plan. These features are the ones that render the generic cash balance to be infamous to the older employees within an