panies fund defined-benefit plans, but no such requirement exists for other pos
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The Employee Retirement Income Security Act (ERISA) requires that companies fund defined-benefit plans, but no such requirement exists for other postretirement benefits such as health insurance.
- Evaluate whether there should be a requirement that other postretirement benefits be funded.
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Solved in 2 steps
- A pension plan is underfunded when the employer’s obligation (PBO) exceeds the resources available to satisfy that obligation (plan assets) and overfunded when the opposite is the case. How is this funded status reported on the balance sheet if plan assets exceed the PBO? If the PBO exceeds plan assets?The Employee Retirement Income Security Act (ERISA) requires that companies fund defined-benefit plans, but no such requirement exists for other postretirement benefits such as health insurance. Considering the characteristics of retirement benefits as compared to the characteristics of other postretirement benefits, what impact does this have on a company's financial statements?A defined benefit plan is one in which: A.) The employer promises specified payments to employees on their retirement. B.)The specific provisions are defined by the Internal Revenue Code. C.) The specific provisions are defined by the Uniform Code of Retirement Plans. D.) The employee can specify the mix of benefits (e.g., health, pension, insurance) that will be received on retirement.
- Detail the possible causes of a deficit in a Defined Benefit (DB) pension plan and explain why a Defined Contribution (DC) pension plan cannot have a deficit.What is meant by past service cost? When is past service cost recognized as pension expense? Differentiate between a defined contribution pension plan and defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans. What disclosures should be made by lessees and lessors related to future payments?Which of the following is not a characteristic of a defined-contribution pension plan? The employer's contribution each period is fixed. If the employer does not make contribution in full, then it reports a pension liability. If the employer contributes more than the required amount, then it reports a pension asset. An appropriate funding pattern must be established to ensure that the promised benefits at employees’ retirement will be met. The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee.
- Differentiate between a defined contribution pensionplan and a defined benefit pension plan. Explain how theemployer’s obligation differs between the two types ofplans.The two main types of pension plans are defined benefit plans and defined contribution plans. Explain the difference between the two. How does the accounting for each differ? With defined benefit plans, there are several levels of benefit obligations for the company. List these and describe what each represents. Which does GAAP require with recognition and why?Explain the fundamental differences between a defined contribution pension plan and a defined benefit pension plan.
- According to PAS for Accounting and Reporting by Retirement Benefit Plans, which of the following may be disclosed in the financial report of a defined benefit plan but would not be shown in the financial report of a defined contribution plan? Actuarial present value of promised retirement benefits Employer contributions Government bonds held Employee contributionsCarson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the calculation, net pension cost is service cost, the interest cost, and actual return on plan assets. What two accounting problems result from the nature of the defined benefit pension plan? Why do these problems arise?What factors go into determining if a pension plan is adequately funded or not?