Question 1

In terms of yields on savings which of the following is the highest performer?

Accepted Answer

Defined benefit pension programs typically offer the highest yields on savings compared to other options listed. This is because the returns are based on a fixed percentage or formula, and the risk is borne by the plan sponsor rather than the participant. Defined contribution programs, such as 401(k)s, can also offer strong returns, but they come with higher risk and depend on the participant's investment choices. Ponzi schemes are illegal and fraudulent, and Social Security payments are determined by factors such as lifetime earnings and age, and may not necessarily provide the highest yields on savings.

Question 2

Public employees (more frequently than private employees)tend

Accepted Answer

Public employees tend to have job security and therefore are more likely to begin and end their career with the same employer. Private employees, on the other hand, may switch employers more frequently in order to advance their career or pursue better opportunities. Choices B, C, and D are not necessarily true for public employees as a group.

Question 3

A defined benefit pension program is one in which

Accepted Answer

A defined benefit pension program is one in which the plan defines eligibility for retirement and benefits according to a set of rules and a formula. This means that the amount of pension benefits is predetermined by the plan and not dependent on individual contributions or investment performance.

Question 4

If you overheard a worker say that her pension would give her 75% of her last year's pay as long as the sum of her age and years worked equaled or exceeded 85 you would know she had

Accepted Answer

The statement describes a defined benefit pension program, which pays a specific benefit amount based on factors such as years of service and final average pay. The condition that the sum of the worker's age and years worked must equal or exceed 85 is a common eligibility requirement for defined benefit plans. Options B, C, and D are not supported by the statement.

Question 5

ERISA stands for

Accepted Answer

ERISA stands for Employee Retirement Income Security Act. This legislation was passed in 1974 to protect employees' rights and benefits related to their pension, health, and welfare plans. It sets certain standards for the management and oversight of these plans, such as disclosure and reporting requirements, fiduciary responsibility standards, and participant rights to sue for benefits. A, C, and D are all incorrect choices as they do not accurately reflect the purpose or scope of ERISA.

Question 6

Which of the following are entitlements?

Accepted Answer

Medicare and Social Security are both considered entitlements because they provide guaranteed benefits to eligible individuals regardless of the amount they have paid into the program. Defined contribution programs, such as 401(k)s, are not entitlements because the benefits received are based on the contributions made by the individual and are not guaranteed.

Question 7

A defined contribution pension program is one in which

Accepted Answer

A defined contribution pension program is one in which both the employee and the employer contribute to an account based on a formula, and the investment of that account is under the control of the employee. This is in contrast to a defined benefit pension program, which defines eligible benefits according to a set of rules and formulas. Option A is describing a defined benefit plan, and options C and D are incorrect.

Question 8

Which of the following explains why private employers (more frequently than public employers)have tended to shift away from defined benefit programs?

Accepted Answer

Private employers have shifted away from defined benefit programs to more flexible retirement options like defined contribution plans due to the increasing mobility of the workforce. Employees now change jobs more frequently, making defined benefit plans, which are more beneficial for long-term employees, less attractive for both employers and employees.

Question 9

ERISA was passed to make sure which of the following was adequately funded?

Accepted Answer

ERISA was passed specifically to ensure that defined benefit pension programs were adequately funded and protected for the benefit of the employees who were enrolled in the plans. Defined contribution programs, Ponzi schemes, and Social Security were not the primary focus of ERISA.

Question 10

Besides retirement pension issues, ERISA focuses some attention

Accepted Answer

ERISA does address the funding requirements for retiree health care plans, in addition to retirement pensions. It does not address payroll taxes or Social Security and only indirectly addresses Ponzi schemes through its requirements for plan funding and fiduciary responsibility.

Question 11

If you overheard a worker say that she has moved up the ladder as far as she can with her current employer and she is going to take the job because they will continue making payments into her 401K you can be pretty sure she is

Accepted Answer

Since the worker mentions that the new job will continue making payments into her 401K, it indicates that she is currently enrolled in a defined contribution program with her current employer. This type of retirement plan allows employees to contribute a certain percentage of their income, and employers may also make contributions. Therefore, the worker is looking for a new job that will provide a better opportunity to save money for her retirement.

Question 12

ERISA focuses much of attention on

Accepted Answer

ERISA (Employee Retirement Income Security Act) is a federal law that sets minimum standards for private sector employers to ensure the protection of employees' retirement benefits. It governs both defined benefit pension programs, where the employer provides a specified level of retirement benefits, as well as defined contribution programs, where the employer contributes a specified amount to the employee's retirement account. Therefore, options A and B are the correct choices. ERISA does not focus on Ponzi schemes or Social Security.

Question 13

Private employees (more frequently than public employees)tend to have their private retirements in

Accepted Answer

Private employees are more likely to have defined contribution programs, such as 401(k)s or IRAs, because they have become increasingly popular alternatives to traditional defined benefit pension plans. Public employees, on the other hand, are more likely to have traditional defined benefit pension plans. Ponzi schemes are illegal and Social Security is a government program, not a private retirement program.

Question 14

Which of the following explains why public employees (more frequently than private employees)tend be in defined benefit programs?

Accepted Answer

Public employees tend to begin and end their career with the same employer, making defined benefit programs a more attractive option for them as they provide a guaranteed retirement income based on years of service and salary. Private employees, on the other hand, are more likely to move from employer to employer, making defined contribution plans a more popular choice as they offer portability and control over investment decisions.

Question 15

Public employees (more frequently than private employees)tend to have their retirements in

Accepted Answer

Public employees, such as those working for government agencies or school districts, tend to have more comprehensive retirement benefits compared to private employees. This often includes participation in defined benefit pension programs, which provide a guaranteed monthly retirement income based on a formula considering the employee's years of service and salary. Private employees, on the other hand, more frequently participate in defined contribution programs, such as 401(k) plans, where a portion of their earnings is contributed to an investment account that they manage themselves. Ponzi schemes and private savings plans are not typically associated with public or private employee retirement benefits.

Question 16

If you overheard a worker say that she has moved up the ladder as far as she can with her current employer but may turn down an offer to move to another company because she is worried about her retirement, you can be pretty sure she is

Accepted Answer

A defined benefit pension program typically offers a guaranteed payout at retirement, which can make employees hesitant to leave due to concerns about losing their accrued benefits.

Question 17

Which of the following explains why private employees (more frequently than public employees)tend be in defined contribution program?

Accepted Answer

Private employees tend to move from employer to employer more frequently than public employees, making defined contribution plans a more attractive option because they can be easily transferred between employers. Public employees may have more stability and longevity in their careers and may prefer defined benefit plans with guaranteed retirement income. Choices A, C, and D are not relevant or accurate explanations for the difference in pension preferences between public and private employees.

Question 18

Economists would label Social Security

Accepted Answer

Social Security is a defined benefit pension program in which an individual's retirement benefit is based on a calculation using their earnings history and age at retirement.

Question 19

If you overheard a worker say that her pension would only give her what she put in and the interest she garnered on those savings regardless of how long she had worked for the company you would know she had

Accepted Answer

If the worker's pension is based on what she put in and the interest it earned, then she is likely part of a defined contribution program. In this type of program, the employer contributes a set amount to the employee's retirement account, and the employee is responsible for managing and investing the funds within that account. At retirement, the employee receives the total value of their account, which is based on their contributions and the performance of the investments within the account. This is different from a defined benefit program, which provides a set benefit to employees based on a formula that considers factors such as years of service, final salary, and other variables.

Question 20

Entitlements have a great deal in common with

Accepted Answer

Entitlement programs, like defined benefit pension programs, promise individuals specific benefits in the future. Both types of programs rely on assumptions about future economic conditions to fund these promised benefits.

Quiz 16: Is the Fiscalsky Falling: An Examination of Unfunded Social Security, Medicare, and State and Local Pension Liabilities