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HRCI SPHR Exam - Topic 2 Question 109 Discussion

Actual exam question for HRCI's SPHR exam
Question #: 109
Topic #: 2
[All SPHR Questions]

A risk reduction strategy that many organizations use for terminated vested participants or retirees of a defined benefit pension plan is to:

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Suggested Answer: C

Offering lump sum payouts removes long-term liabilities and actuarial risk for the company. It allows participants to take full control, and organizations to reduce future plan obligations.

Extract from HRCI-aligned HR knowledge (Total Rewards):

SPHR knowledge includes ''risk mitigation in legacy retirement plans,'' and identifies de-risking strategies such as lump sum offerings to reduce exposure to market fluctuations and longevity risk.


by Jerilyn at Nov 21, 2025, 10:39 PM

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Tula
1 day ago
D seems drastic. Terminating the plan could hurt many.
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Mitsue
6 days ago
True, but it might upset employees. They want their benefits now.
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Johnetta
11 days ago
Agreed! It gives retirees immediate cash.
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Leatha
17 days ago
Increasing the retirement age could be a smart move too.
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Ronna
22 days ago
I’m not sure lump sums are the best option for everyone.
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Alline
27 days ago
Wait, terminating the plan? That sounds risky!
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Anthony
2 months ago
Totally agree, it helps reduce long-term liabilities!
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Cecil
2 months ago
C) Provide lump sum payouts is a common strategy.
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Alfreda
2 months ago
Haha, D) Terminate the plan. That's the ultimate risk reduction strategy - just make the problem go away entirely!
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Goldie
2 months ago
C) Lump sum payouts is the way to go. Retirement planning? More like retirement gambling!
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Jesusa
2 months ago
I'd go with C) Lump sum payouts. Who needs a steady stream of income when you can just get it all at once and blow it on a fancy sports car?
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Jani
2 months ago
Lump sum payouts? Sounds like a great way to get rid of those pesky retirees! Where do I sign up?
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German
3 months ago
C) Provide lump sum payouts is the correct answer. This allows the organization to offload the risk and liability associated with the pension plan.
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Stephen
3 months ago
Reducing benefit contributions seems risky; I thought that could lead to more dissatisfaction among participants.
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Harris
3 months ago
I feel like terminating the plan could be a drastic measure, but it might be a way to reduce future liabilities.
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Terrilyn
3 months ago
I remember a practice question that discussed increasing the retirement age, but I can't recall if that was specifically for risk reduction.
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Gail
3 months ago
I think providing lump sum payouts might be a common strategy, but I'm not entirely sure if it's the best option for everyone.
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Lemuel
3 months ago
The lump sum payout option makes the most sense to me. It allows the organization to transfer the risk and liability to the individual participants, which is a common way to manage pension plan risk. I feel pretty confident that's the right answer here.
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Yolando
4 months ago
I'm a bit confused on this one. Increasing the retirement age or reducing benefit contributions don't really seem like risk reduction strategies from the organization's perspective. I'll have to carefully re-read the question and think it through.
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Joanna
4 months ago
For this type of question, I'd start by identifying the key goal - which is risk reduction for the organization. Providing lump sum payouts allows them to offload that liability, so I'm leaning towards that as the best answer.
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Jess
4 months ago
I think C is the best option. Lump sums are attractive.
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Hailey
4 months ago
But what about A? Increasing the retirement age could save money long-term.
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Marjory
5 months ago
Hmm, I'm not totally sure about this one. I'd have to think through the different options and consider the pros and cons of each approach. Reducing benefit contributions or terminating the plan entirely also seem like potential risk reduction strategies.
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Erinn
5 months ago
I think the answer is C - providing lump sum payouts. That seems like a common way for organizations to reduce their pension plan liabilities.
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Ciara
4 months ago
But what about the impact on retirees?
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