As Social Security Slants Benefits in Favor of Lower-Paid Workers,the

question 7

Multiple Choice

As Social Security slants benefits in favor of lower-paid workers,the Internal Revenue Service permits employers to adjust pension contributions so that the overall contributions (pension plus Social Security) are nondiscriminatory.This adjustment permits employers to increase pension contributions for highly-compensated employees.Adjusting contributions to consider Social Security contributions is called

• A)prorating.
• B)indexing.
• C)offset.
• D)integration.

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Definitions:

Zero Coupon Bond

A bond that is issued at a discount to its face value and pays no interest before maturity, when its full face value is repaid.

Nominal Market Yield

The stated or face interest rate of a bond or other fixed-income security without adjusting for inflation.

Semi-Annually

Occurring or calculated twice a year, typically every six months.

Comparable Issues

Securities or financial instruments that are similar in terms of yield, maturity, credit quality, and other characteristics, used for benchmarking.