NO.PZ2019100901000013
问题如下：
Fiona Heselwith is a 40-year-old US citizen who has accepted a job with Lyricul, LLC, a UK-based company. Her benefits package includes a retirement savings plan. The company offers both a defined benefit (DB) plan and a defined contribution (DC) plan but stipulates that employees must choose one plan and remain with that plan throughout their term of employment.
The DB plan is fully funded and provides full vesting after five years. The benefit formula for monthly payments upon retirement is calculated as follows:
Final monthly salary × Benefit percentage of 2% × Number of years of service
The final monthly salary is equal to average monthly earnings for the last five financial years immediately prior to the retirement date
The DC plan contributes 12% of annual salary into the plan each year and is also fully vested after five years. Lyricul offers its DC plan participants a series of life-cycle funds as investment choices. Heselwith could choose a fund with a target date matching her planned retirement date. She would be able to make additional contributions from her salary if she chooses
Discuss the features that Heselwith should consider in evaluating the two plans with respect to the following:
i. Benefit payments
ii. Contributions
iii. Shortfall risk
iv. Mortality/longevity risks
Answers：
i. Benefit payments：
DB plan's benefit payments are certain and are based on the formula: Final monthly salary × Benefit percentage of 2% × Number of years of service. It's employers' legal obligations to provide benefit payments to fund employees' retirement.
DC plan's benefit payments are uncertain and are based on contributions of both employees and employers as well as investment performance of investments provided by plan sponsors.
ii. Contributions
DB plan's primary contributor is employer. Employees contribute less. The contributions are not certain and mainly driven by the plan's funded status.
DC plan's primary contributor is employees. Employers contribute less.
iii. Shortfall risk
DB plan's shortfall risk refers to underfunded status, which PV of benefit mayments is smaller than PV of obligations. Plan sponsors bear the risk.
DC plan's shortfall risk refers to lack of enough money to fund retirement lifestyles. Employees bear the risk.
iv. Mortality/longevity risks
DB plan has pooled the longevity risks. Those who pass away earlier leave assets for those who live longer. DB plans bear no longivity risk.
For DC plan, employees bear the longivity risk.
老师麻烦给我批改下上面的问答题哈，谢谢！
