Question

33 steve is 50 years old and employed. he contributes to a defined contribution pension plan (dcpp) that allows him to make investment decisions. he is satisfied with the investment options provided by his dcpp. he plans to switch job and transfer the funds in his dcpp to the pension plan of the new employer. which of the following must steve be aware of before he transfers the funds?
a. he may be able to transfer funds only if the terms of the new pension plan are identical to the terms of his current plan.
b. after the funds are transferred, he can undo the transfer anytime if he finds the new range of investment options to be unsuitable.
c. he may be able to transfer funds to the new pension plan only if the investments offered under the new plan are identical to his current plan.
d. once the funds are switched, they are permanently embedded in the new plan unless he changes employers again.

Explanation:

To solve this, we analyze each option:

• Option a: There's no requirement for the new plan's terms to be identical to the current one for a transfer. So this is incorrect.
• Option b: Once a transfer of pension funds is done, it's typically not reversible just because of unsuitable investment options. So this is incorrect.
• Option c: The new plan's investments don't need to be identical to the current one for a transfer. So this is incorrect.
• Option d: In defined contribution pension plans, once funds are transferred to a new employer's plan, they are part of that new plan unless there's another job change (which would involve another transfer process). This aligns with pension transfer rules.

Answer:

d. Once the funds are switched, they are permanently embedded in the new plan unless he changes employers again.