Question: A newly established firm wants to establish a pension plan
A newly established firm wants to establish a pension plan for its employees. The firm hires you to prepare a report comparing a defined benefit pension plan with a defined contribution pension plan. The firm also requires a recommendation from you as to which plan better suits them. On questioning management, you learn that the firm’s future profitability is likely to be highly variable—sometimes large profits, at other times possible losses. You also learn that the firm is an aggressive tax planner. What type of pension plan would you recommend? Explain your reasoning.
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