Winslow Corporation has many long-term employees. The company has never had a pension plan. Recently, a new management team was hired. The new president said he would like to start a pension plan through which he could reward the long-term service provided by many employees. Which of the following types of plans should Winslow Corporation adopt?

Question

Quizplus · Accepted Answer

A defined benefit plan is the best choice for Winslow Corporation because it is designed to provide retirement benefits based on a formula that takes into account factors such as an employee's salary and length of service. This type of plan is ideal for rewarding long-term employees, as it provides a guaranteed retirement benefit that becomes more valuable as an employee's tenure increases. The other options (403(b), 401(k), and money-purchase plans) are all defined contribution plans, meaning that the employee contributes money to their own account, which is then invested to provide retirement income. These plans don't guarantee a set level of retirement income, so they may not be as effective at rewarding long-term employees as a defined benefit plan would be.

Winslow Corporation Has Many Long-Term Employees