A Job at Hillsdale Inc.

you recently graduated from university, and your job search led you to Hillsdale Inc. Because you

felt the company's business was taking off, you accepted a job offer. The first day on the job, while

you are finishing your employment paperwork, Shane Shillingford, who works in finance, stops by

to inform you about the company's defined contribution $($DC$)$ pension plan.

ADC pension plan is a retirement plan offered by many companies. Such plans are tax$-$deferred

savings vehicles, meaning that any deposits you make into the plan are deducted from your cur$-$

rent pre$-$tax income, so no current taxes are paid on the money. For example, assume your salary

will be $$100,000$ per year. If you contribute $$6,000$ to the DC pension plan, you will pay taxes on

only $$94,000$ in income. There are also no taxes paid on any capital gains or income while you

are invested in the plan, but you do pay taxes when you withdraw money at retirement. As is fairly

common, the company also has a $5\%$ match. This means that the company will match your contri$-$

bution up to $5\%$ of your salary, but you must contribute to get the match.

The DC pension plan has several options for investments, most of which are mutual funds. A

mutual fund is a portfolio of assets. When you purchase shares in a mutual fund, you are actually

purchasing partial ownership of the fund's assets. The return of the fund is the weighted average

of the return of the assets owned by the fund, minus any expenses. The largest expense is typical$-$

ly the management fee, paid to the fund manager. The management fee is compensation for the

manager, who makes all of the investment decisions for the fund.

Hillsdale Inc. uses TD Canada Trust as its DC pension plan administrator. Here are the investment

options offered for employees:

Company Stock One option in the DC pension plan is stock in Hillsdale Inc. The company is cur$-$

rently privately held. However, when you interviewed with the owner, Kevin Cooper, he informed

you the company stock was expected to go public in the next three to four years. Until then, a

company stock price is simply set each year by the board of directors.