The replacement ratios for long service existing employees under the defined contribution plan are inadequate given the company’s stated goals. The replacement ratios under the proposed defined benefit plan are, however, adequate for the long service employees because past service is recognized under the defined benefit plan. We should investigate whether a partial or temporary defined benefit plan could be used to address this business risk.
Finalizing solutions to this potential problem is premature at this stage since it is possible that the Chocolate Factory is not concerned about the provision of career pensions to its existing long service employees.