Joe's Traditional Defined Benefit Pension Plan

Joe's Retirement Plan

Joe, aged 46, has been the owner of his company for 18 years and has a plan to retire at age 70. He is looking to adopt a qualified retirement plan that will not only benefit him but also reward employees who have been loyal to the company with long years of service. All of Joe's employees are older than him and have worked with the company for an average of eight years. After careful consideration, Joe has decided to go with a traditional defined benefit pension plan with a unit benefit formula.

Requirements for Joe's Retirement Plan

Joe is looking for a retirement plan that will favor him as the owner and also recognize the dedication and loyalty of his employees who have been serving the company for a substantial amount of time. By opting for a traditional defined benefit pension plan with a unit benefit formula, Joe hopes to achieve these objectives.

What is true regarding Joe's traditional defined benefit pension plan?

Answer:

A traditional defined benefit pension plan will maximize Joe's benefits and reward long-term employees based on the length of service.

Explanation:

By selecting a traditional defined benefit pension plan with a unit benefit formula, Joe is ensuring that he will receive maximum benefits upon retirement. This plan will also serve as a way to acknowledge and reward the dedication of employees who have been with the company for a significant amount of time. It is a win-win situation that creates a sense of security for Joe in his retirement while also valuing the efforts of his loyal employees.

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