BUS 410 CH18 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
What is the primary purpose of a pension fund? - Answers To allow participants to accumulate tax-
deferred savings during their working years for use in retirement.
When are tax payments made on funds invested in a pension plan? - Answers Tax payments are
made only when the funds are withdrawn by the participant during retirement.
When and why were the first pension funds established in the U.S.? - Answers In 1759, to benefit the
widows and children of church ministers.
Which entities are the main providers of pension funds? - Answers Mutual funds and insurance
companies.
What was the impact of the 2008-2009 financial crisis on global pension assets? - Answers It caused a
decrease in the value of worldwide pension assets from $25 trillion to $20 trillion.
What is the difference between private and public pension funds? - Answers Private funds are
administered by private corporations, while public funds are administered by federal, state, or local
government.
What is a defined benefit pension plan? - Answers A plan where the employer agrees to provide a
specific cash benefit upon retirement based on a set formula.
What is a flat benefit formula? - Answers A formula that pays a flat amount for every year of
employment.
What is a career average formula? - Answers A formula that pays benefits based on the employee's
average salary over their entire period of employment.
What is a final pay formula? - Answers A formula that pays benefits based on a percentage of the
average salary during a specified number of years at the end of the career, multiplied by years of
service.
What is a fully funded pension plan? - Answers A plan that has sufficient funds available to meet all
future payment obligations.
What is an underfunded pension fund? - Answers A fund that does not have sufficient assets to meet
all future promised payments.
What is a defined contribution pension fund? - Answers A fund where the employer makes a
specified contribution, but does not guarantee a specific retirement income amount.
What is the primary risk for employees in a defined contribution plan? - Answers Employees must
accept the risk of uncertain payouts and market performance.
How do fixed-income funds differ from variable-income funds? - Answers Fixed-income funds offer a
guaranteed minimum rate of return, while variable-income funds pass all investment profits and
losses to participants.
What is an insured pension fund? - Answers A fund administered by a life insurance company where
assets are pooled and invested in the insurer's general assets.
What is a noninsured pension fund? - Answers A fund administered by a financial institution other
than a life insurance company, where assets are segregated and managed by a trustee.
What trend has been observed regarding the number of defined benefit plans since 1990? - Answers
The number of defined benefit plans has significantly decreased, falling from over 100,000 to fewer
than 50,000 by 2019.
What trend has been observed regarding the number of defined contribution plans since 1990? -
Answers The number of defined contribution plans has increased, growing from approximately
600,000 to over 650,000.
What percentage of private pension plans were defined contribution plans as of 2019? - Answers
More than 90%.
What are 401(k) and 403(b) plans? - Answers Employer-sponsored plans that supplement a firm's
basic retirement plan.
Who established the first corporate pension fund in the U.S. and when? - Answers The American
Express Company in 1875.
How did the 2008-2009 financial crisis affect individual retirement behavior? - Answers Many people
were forced to postpone retirement, take second jobs, or downsize their lifestyles.
In a noninsured pension fund, who controls the day-to-day investment decisions? - Answers The
trustee.
What is the main advantage of defined contribution plans for employees? - Answers They offer
higher potential returns relative to defined benefit funds.
What is the primary purpose of a pension fund? - Answers To allow participants to accumulate tax-
deferred savings during their working years for use in retirement.
When are tax payments made on funds invested in a pension plan? - Answers Tax payments are
made only when the funds are withdrawn by the participant during retirement.
When and why were the first pension funds established in the U.S.? - Answers In 1759, to benefit the
widows and children of church ministers.
Which entities are the main providers of pension funds? - Answers Mutual funds and insurance
companies.
What was the impact of the 2008-2009 financial crisis on global pension assets? - Answers It caused a
decrease in the value of worldwide pension assets from $25 trillion to $20 trillion.
What is the difference between private and public pension funds? - Answers Private funds are
administered by private corporations, while public funds are administered by federal, state, or local
government.
What is a defined benefit pension plan? - Answers A plan where the employer agrees to provide a
specific cash benefit upon retirement based on a set formula.
What is a flat benefit formula? - Answers A formula that pays a flat amount for every year of
employment.
What is a career average formula? - Answers A formula that pays benefits based on the employee's
average salary over their entire period of employment.
What is a final pay formula? - Answers A formula that pays benefits based on a percentage of the
average salary during a specified number of years at the end of the career, multiplied by years of
service.
What is a fully funded pension plan? - Answers A plan that has sufficient funds available to meet all
future payment obligations.
What is an underfunded pension fund? - Answers A fund that does not have sufficient assets to meet
all future promised payments.
What is a defined contribution pension fund? - Answers A fund where the employer makes a
specified contribution, but does not guarantee a specific retirement income amount.
What is the primary risk for employees in a defined contribution plan? - Answers Employees must
accept the risk of uncertain payouts and market performance.
How do fixed-income funds differ from variable-income funds? - Answers Fixed-income funds offer a
guaranteed minimum rate of return, while variable-income funds pass all investment profits and
losses to participants.
What is an insured pension fund? - Answers A fund administered by a life insurance company where
assets are pooled and invested in the insurer's general assets.
What is a noninsured pension fund? - Answers A fund administered by a financial institution other
than a life insurance company, where assets are segregated and managed by a trustee.
What trend has been observed regarding the number of defined benefit plans since 1990? - Answers
The number of defined benefit plans has significantly decreased, falling from over 100,000 to fewer
than 50,000 by 2019.
What trend has been observed regarding the number of defined contribution plans since 1990? -
Answers The number of defined contribution plans has increased, growing from approximately
600,000 to over 650,000.
What percentage of private pension plans were defined contribution plans as of 2019? - Answers
More than 90%.
What are 401(k) and 403(b) plans? - Answers Employer-sponsored plans that supplement a firm's
basic retirement plan.
Who established the first corporate pension fund in the U.S. and when? - Answers The American
Express Company in 1875.
How did the 2008-2009 financial crisis affect individual retirement behavior? - Answers Many people
were forced to postpone retirement, take second jobs, or downsize their lifestyles.
In a noninsured pension fund, who controls the day-to-day investment decisions? - Answers The
trustee.
What is the main advantage of defined contribution plans for employees? - Answers They offer
higher potential returns relative to defined benefit funds.
