The return objectives of a DB pension plan are related to which of the following?

The return objectives of a defined benefit (DB) pension plan are closely linked to future pension contributions and pension income. This relationship is crucial because a DB pension plan promises specific retirement benefits to employees, usually based on factors such as salary history and years of service. To fulfill these promised benefits, the pension plan must ensure that it generates sufficient returns on its investments.

Future pension contributions are essential because they represent the funding necessary to meet future obligations. The returns generated by the pension's investments directly affect the plan's ability to meet these obligations. As the plan aims to match its future cash outflows (pension payments to retirees) with incoming cash flows (contributions and investment income), the return objectives must be set in a way that accounts for these future cash flows.

Additionally, the connection between these return objectives and pension income is significant because the income generated from investments contributes to the overall funding needed to pay retirees. Thus, if the investment performance aligns with the return objectives, the plan can effectively meet its ledgers.

Overall, focusing on future contributions and income ensures that the plan can achieve its promises while managing the financial risks associated with funding retiree benefits.