Harry Markham's Dilemma Questions

Please read the case study “ Harry Markhams’ s Loyalty Dilemma ” and answer the following questions . 1 ( Briefly explain Harry Markham’s ethical dilemma . when valuing the liabilities he would get numbers twice as high as what was reported by the funds. This would not be a problem if he could directly edit the numbers but he can’t. And neither his clients nor his firm wanted to call out the problem with the numbers. His problem came down to conflicting loyalties. Loyalty to his firm, loyalty to the trustees, and loyalty to others who made decisions for public pensions . 2 ( In about a paragraph, explain the difference between “defined benefit” and “defined contribution ” In a defined contribution plan the employee has all the power. They bore all of the responsibility for how much money they put into the retirement plan. This plan has significantly fewer participants because not only are you paying higher fees but it also doesn't promise optimal savings and even allows for you to withdraw money before you retire opening up the gates for bad financial decisions to be made. A defined benefit plan however is the opposite they are created and agreed-upon investments that take place early and are controlled by the employer. With the risk of payouts falling short, the government is forced to step in if numbers do not meet expectations . 3 ( Which kind of workers have public pensions ? “ Any Public sector employees for example state and local government workers ”. 4 ( In a paragraph or two, explain the problem with the discount rate used by accountants (and endorsed by the Government Accounting Standards board .( The problem with the discount rate used by the accountants has to do with how it skews trust. And when given a better discount rate it still doesn’t factor in the reality of the pensions. Usually pensions valued at low risk have a high discount rate This case would be a high-risk pension with a high discount rate without investors even knowing. With this in mind, we can start to see the problem that begins with investors getting blindly deceived into trusting a high-risk opportunity 5 ( Explain why plan sponsors, taxpayers, and state legislatures all have an interest in reporting low liabilities for these pension plans . It makes them predisposed to points of view that justify higher discount rates, this is beneficial to sponsors, taxpayers, and state legislatures because it lessens the risk of any new risk by default . 6 ( Note that the numbers Harry finds suspect are in fact endorsed by the GASB and other accounting organizations. Given this, do you think Harry has an obligation to raise the liability issue with his clients? (Answer in about a paragraph .( I believe that Harry has an obligation to raise an issue with the clients. It is a “professional responsibility to inform the plan sponsors to make good investment decisions”. If he doesn’t raise the liability then he will be breaking the obligation. There is no point in breaking this obligation because it just puts both their clients, him, and his firm in disarray .