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5. Underfunded public defined-benefit pensions Every government agency that offers a defined-benefit plan should automatically set aside funds each pay period for each employee who
5. Underfunded public defined-benefit pensions Every government agency that offers a defined-benefit plan should automatically set aside funds each pay period for each employee who is participating in the plan. Suppose a government agency sets aside a smaller amount of money to meet future obligations in order to use the funds for other politically motivated purposes. What are the likely consequences when the government has to take steps to remedy the shortfall? Check all that apply. Reduced government employee pensions Increased vesting periods Higher taxes Reduced spending on education There are several strategies that government officials could follow to reduce underfunded pension plans. These include issuing bonds, using aggressive investment strategies, revising the required pension contributions or benefits, raising taxes or cutting services, holding government officials accountable, and shifting from defined-benefit plans to defined contribution plans. However, each strategy is subject to some limitations. Suppose the government shifts from a defined benefit plan to a defined-contribution plan. Which of the following would be true? O Neither the existing nor future underfunding issues would be resolved. Although the existing underfunding problems would not be resolved, future underfunding could be prevented. The existing and future underfunding issues would be resolved. O Although the future underfunding problems would not be prevented, the existing underfunding could be resolved
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