Directing Retirement Plans Part 1 (U.S.) / Managing Retirement Plans Part 1 (Canada)
Plan architecture
Part 1 covers design and the rules that shape it. In the U.S., distinguish defined benefit, defined contribution, and hybrid designs such as cash balance; and among DC vehicles: 401(k), 403(b), governmental 457(b), profit sharing, ESOP, SIMPLE, and SEP. In Canada, distinguish registered pension plans (defined benefit and defined contribution), defined contribution pension plans, group RRSPs, TFSAs, and the public pillars (CPP/QPP, OAS), plus provincial pension standards.
Core design levers
Eligibility (age and service), vesting (cliff and graded schedules), employee and employer contributions, matching formulas, automatic enrollment and escalation, investment menus, loans and withdrawals, and distribution options. Understand nondiscrimination and coverage testing in the U.S. (ADP/ACP, top-heavy, safe harbors) and the corresponding Canadian limits on pension adjustments and contribution caps.
Fiduciary basics
The sponsor selects and monitors the plan's investment lineup and service providers, controls fees, and follows plan documents. Understanding who is a fiduciary, and when, is a recurring exam theme.
Worked example
A plan matches 100% of the first 3% of pay and 50% of the next 2%. An employee earning $80,000 contributes 5%. Match = (3% × $80,000) + (50% × 2% × $80,000) = $2,400 + $800 = $3,200. Contributing 10% earns the same $3,200; the formula, not the deferral rate, caps the match.
Traps and rule of thumb
Traps: confusing vesting of employer contributions with vesting of employee deferrals (always 100% vested); assuming a match is required; mixing up Canadian and U.S. contribution limits. Rule of thumb: design flows from workforce profile and replacement-income goals, then gets tested against the rules.