Complexity of defined benefit versus defined contribution
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Distinguish between a defined benefit pension plan and a defined contribution plan. Why does a defined benefit plan present far more complex accounting issues than a defined contribution plan?
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Pension plans can make your eyes roll but here it is simply explained in everyday language. Suitable for novice to expert. Three paragraphs.
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A defined benefit promises a certain pension upon retirement, usually some percent of salary times years of service (although the promise formula can change from plan to plan). So, there is a promise to meet a certain annuity (set amount each period) for the life of the participant. There is no promise to set aside certain funds or any set amount for ...
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