FDU is a telecommunications provider located in NJ with hundreds of thousands of employees. Their CEO, Patrick Cozza, is considering the replacement of their expensive defined benefit (DB) pension plan which requires large contributions every year with a 401(k) where the employees will bear the investment risk. The majority of the workforce is young and the top executives are all in their 50s and 60s.

a. As Patricks top financial advisor, what type of qualified retirement plan would you recommend instead of the 401(k) if he wants the majority of the benefits to accrue to the top executives?

b. An intern who works for you recommends utilizing a DB/K plan. What is your opinion of using such a plan in this case?

c. Who would benefit the most from the change away from the DB plan to a 401(k) plan?

d. What is the maximum contribution to a 401(k) of a worker age 56, who earns $20,000 per year as a factory worker with FDU?