Question 1 asks about the pension plan for CHM Corporation but in the reading, it indicates that “company employees participate in a defined contribution plan in which investments in the plan is participant directed”.
This doesn’t makes sense. Pension plan is NOT defined contribution plan.
Defined contribution pension plans are still pension plans, just with different characteristics, which the question asks about.
It doesn’t say defined contribution pension plan. Secondly, it says the plan is participant directed
So the question asks about a pension plan when the reading is talking about a defined contribution plan
Anyone?
DB and DC are two types of pension plans. Non-pension DC plans, if that’s a thing, are not covered by CFA curriculum.
If the item set writer intentionally put the word pension in the question, then it was designed to throw you off, which it seems it did. The important thing is identifying that the question is testing your knowledge of the difference between defined benefit and defined contribution plans.
But the wording is not incorrect. A defined contribution plan is a type of pension plan.
Great, thanks. I’m glad I now understand the difference.