State and local governments typically provide defined-benefit retirement plans to eligible employees. Defined-benefit pension plans have certain common features.

a. Briefly describe the following provisions that appear in a typical definedbenefit retirement plan:

– Normal retirement age

– Early retirement age

– Method of financing

b. Why are many defined-benefit pension plans substantially underfunded?

c. Explain several approaches the states are taking to deal with the problems of rising pension costs and the underfunding of defined-benefit plans.