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Author Question: The Pension Benefits Guarantee Corporation guarantees both defined benefit plans and defined ... (Read 59 times)

CharlieWard

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on: Jul 7, 2018
The Pension Benefits Guarantee Corporation guarantees both defined benefit plans and defined contribution plans.
 
  Indicate whether this statement is true or false.

Question 2

What are vested funds? What is the difference between cliff vesting and graded vesting?
 
  What will be an ideal response?


brbarasa

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Reply #1 on: Jul 7, 2018
Answer to Question 1

Answer: FALSE

Answer to Question 2

Answer: Vested funds are the money employer and employee have placed in the latter's pension fund that cannot be forfeited for any reason. The employees' contributions are always theirs, of course. Employers can choose one of two minimum vesting schedules (employers can allow funds to vest faster if they wish). With cliff vesting, the period for acquiring a nonforfeitable right to employer matching contributions (if any) is three years. So, the employee must have nonforfeitable rights to these funds by the end of three years. With the second (graded vesting) option, pension plan participants must receive nonforfeitable rights to the matching contributions as follows: 20 after 2 years, and then 20 for each succeeding year, with a 100 nonforfeitable right by the end of 6 years.


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