Question

For each of the following, indicate the fund, if any in which the government would account for the resources described. If a fiduciary, rather than a governmental fund, indicate the type of fund. Briefly justify your response. 1. A government contributes to a pension fund maintained by a union representing some of its employees. The government determines all significant terms of the plan, most notably eligibility requirements and retiree benefits. However, all investment decisions, including when to buy and sell securities are made by a committee composed of union officers.

Answer 1

New defined contribution pension scheme (DCPS) works on defined contribution basis and it has two tiers tier 1 and tier 2 .contribution to tier 1 is mandatory for all government servants joining government service where as tier 2 will be optional and at the discretion of government servants.Under tier 1 government servants will have to make a contribution of 10% of his basic pay plus DA which will be deducted from his salary bill every month by the DDO concerned .The government will make an equal matching contribution.Tier 1 contributions will be kept in a non withdrawable pension tier 1 account.tier 2 contributions will be kept in a separate account that will be available for withdrawal at the option of the government servant.Government will not make any contribution to tier 2 account.