Benefit Retirement Plans and Plan Distributions

The Mt. Nittany Corporation is a small, publicly traded manufacturer in Pennsylvania that makes electronic devices. It has a non-organized workforce. There are about 500 employees, 75% of which are non-skilled workers making about $40,000 per year. About 20% of the employees are managers or individual contributors who earn roughly $70,000 per year, and about 5% are highly compensated executives who command salaries of $150,000 per year. Half of the employees have been with the company for twenty years, 25% have been with the company for 10 years and about 25% have been with them for less than 5 years.

Mt. Nittany is considering implementing a defined benefit retirement plan for all of its workers. Given what you know about defined benefit plans, comment on the following:

  • Would you support implementing a defined benefit plan? Why or why not? (Give at least two reasons to support your answer.)
  • If they implemented a defined benefit plan, which benefit formula would you recommend to determine the benefit level? Why? What are the potential consequences of your choice?