Question

For employer-sponsored Defined Benefit (DB) pension plans, if investment returns are so poor that the level...

For employer-sponsored Defined Benefit (DB) pension plans, if investment returns are so poor that the level of retirement benefits cannot be maintained . . .
1- the entire pension plan must be completely discontinued

2- the employer must provide additional funds to pay benefits

3- the employer can reduce benefits
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Answer #1

2- the employer must provide additional funds to pay benefits

The employer guarantees a specific sum of benefits to the employees irrespective of the performance of the underlying investment pool. If the performance of the investment fund is too poor to pay the benefits, the employer/ company must compensate for the gap and pay the employees.

The Entire plan cannot be discontinued as it is the security of the employees for their retirement. Employer cannot also reduce the benefits since the benefits are guaranteed to the employees.

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