Problem 1. What are the differences and similarities between a defined contribution plan and a defined benefit plan? As an employee, would you rather have a defined contribution plan or a defined benefit plan? Why? As an employer, would you rather offer a defined contribution plan or a defined benefit plan? Why?
Problem 2. What are the components of pension expense? How is the interest rate determined? Why are prior service costs amortized? How do the components of pension expense differ among the various types of contribution and benefit plans?
Problem 3. Under the 'Read Me First' material, it states: 'Congress is considering making defined benefit programs more attractive, including the creation of "defined benefit 401(k)" plans, which would have many of the advantages employees like in 401(k) plans, such as pre-tax employee contributions and matches, but it would pay a guaranteed lifetime benefit.' What are your thoughts on this type of plan?