Describe the most common eligibility requirements in qualified plans?
Solution
Qualified plans come in two types: defined benefit and defined contribution. Defined benefit plans give employees a guaranteed payout and place the risk on the employer to save and invest properly to meet plan liabilities. A traditional pension is an example of a defined benefit plan. Under defined contribution plans, the amount employees receive in retirement depends on how well they save and invest on their own behalf during their working years. A 401(k) plan is an example of a defined contribution plan.
Qualified plans only allow certain types of investments, which vary by plan but typically include publicly traded securities, real estate, mutual funds and money market funds. They also specify when distributions can be made, typically when the employee reaches the plan
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Describe the most common eligibility requirements in qualified plans-S.docx
1. Describe the most common eligibility requirements in qualified plans?
Solution
Qualified plans come in two types: defined benefit and defined contribution. Defined benefit
plans give employees a guaranteed payout and place the risk on the employer to save and invest
properly to meet plan liabilities. A traditional pension is an example of a defined benefit plan.
Under defined contribution plans, the amount employees receive in retirement depends on how
well they save and invest on their own behalf during their working years. A 401(k) plan is an
example of a defined contribution plan.
Qualified plans only allow certain types of investments, which vary by plan but typically include
publicly traded securities, real estate, mutual funds and money market funds. They also specify
when distributions can be made, typically when the employee reaches the plan
