This plan sets up a hypothetical individual account for each employee, and credits each participant annually with a plan contribution.The employer also guarantees a minimum interest credit on the account balance.Identify this plan.
A)Unit benefit plan
B)Money purchase plan
C)Target pension plan
D)Profit sharing plan
E)Cash balance plan

Question

Quizplus · Accepted Answer

The described plan is a cash balance plan, which is a type of defined benefit pension plan that appears to be a defined contribution plan. Each employee has a hypothetical account that is credited with contributions and interest, but the employer bears the investment risk and guarantees a minimum return.

This Plan Sets Up a Hypothetical Individual Account for Each