A defined benefit plan should: A) invest plan assets without distinction between the tax consequences of returns generated from income and returns generated from capital gains. As a tax-exempt investor, there should be no preference over income or capital gains. This is correct? Are the benefits taxed when they are paid out? I don’t remember reading anything about DBP tax status in the notes.
I believe DBP benefits are taxed when paid out (in the US at least), but that’s irrelevant from the perspective of a DBP as investor. I believe conceptually the idea above is correct and I’d be surprised if it didn’t specify in the curriculum that DBPs are tax-exempt investors.