Federal Employee Benefit

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1. What are the essential differences between endowments, final-salary definedbenefit (DB) pensions plans, and cash-balance (CB) pension plans? A Cash Balance plan is a defined benefit plan that specifies both the contribution to be counted to each participant and the investment earnings to be counted based on those contributions. Each participant has an account that resembles those in a 401(k) or profit sharing plan. They are based on two ways: 1) The company contribution – a percentage of pay or a flat dollar amount – determined by a specified formula 2) An annual interest credit. The rate of return is guaranteed and is independent of the plan's investment performance. That rate may either be a fixed rate over time or may change each…show more content…
So, it tells me that the pension fund’s return is positive correlated to the time horizon, also, in the paper it also says the two pension funds are subject to the federal Employee Retirement Income Security Act which required that each plan’s asset be held in trust for the benefit of the plan’s participates AND the assets should be sufficiently diversified. This two information will be the guidelines for my investments on these two pe nsion fund investments which are investing in the long-term assets and diversify the allocation as much as possible. For the final-salary pension fund, it is a defined benefit pension fund which provides a specific benefit for an eligible employee at retirement,this type of pension fund is good for the employee as it is required to offer payment of an employee's benefit in the form of a series of payments for life. Based on the targeted asset allocation for pension fund, I would raise the weight of alternative investments because the arbitrage and hedge funds include four diversified value mangers and the beta is about 0.2. In order

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