SPHR · Question #30
A risk reduction strategy that many organizations use for terminated vested participants or retirees of a defined benefit pension plan is to:
The correct answer is C. Provide lump sum payouts. Offering lump sum payouts removes long-term liabilities and actuarial risk for the company. It allows participants to take full control, and organizations to reduce future plan obligations. Extract from HRCI-aligned HR knowledge (Total Rewards): SPHR knowledge includes "risk…
Question
A risk reduction strategy that many organizations use for terminated vested participants or retirees of a defined benefit pension plan is to:
Options
- AIncrease the retirement age
- BReduce benefit contributions
- CProvide lump sum payouts
- DTerminate the plan
How the community answered
(32 responses)- A13% (4)
- B9% (3)
- C75% (24)
- D3% (1)
Explanation
Offering lump sum payouts removes long-term liabilities and actuarial risk for the company. It allows participants to take full control, and organizations to reduce future plan obligations. Extract from HRCI-aligned HR knowledge (Total Rewards): SPHR knowledge includes "risk mitigation in legacy retirement plans," and identifies de-risking strategies such as lump sum offerings to reduce exposure to market fluctuations and longevity
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