Canadian Securities Course (CSC) Level 1 Practice Exam

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What are the two types of government-related pension funds?

Term Life and Whole Life Insurance plans
Fixed and Variable Annuities
Defined Benefit and Defined Contribution plans
401(k) and Roth IRA accounts

The correct answer is: Defined Benefit and Defined Contribution plans

The correct answer is grounded in the structure of government-related pension funds. Defined Benefit and Defined Contribution plans are the primary types of retirement plans that may be offered by government entities. Defined Benefit plans provide retirees with a predetermined monthly benefit upon retirement, based on factors such as salary history and years of service. These plans ensure that employees receive a stable income in retirement, which is often funded by both employee and employer contributions. Defined Contribution plans, on the other hand, involve contributions made by both the employee and employer into an individual account. The amount available at retirement depends on the contributions made and the investment performance of the account. This type of plan shifts the investment risk onto the employee but can offer more flexibility in terms of investment choices. The other options provided do not pertain specifically to government-related pension funds, making them irrelevant in this context. Understanding the distinction between these two types of plans is essential for grasping how pension benefits are structured in government employment.