Long-Term Financial Liabilities: Pension Plan
Not what you're looking for?
Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer's obligation differs between the two types of plans.
Identify the five components that comprise pension expense. Briefly explain the nature of each component
Discuss briefly the three approaches that have been suggested for reporting changes in accounting principle.
Purchase this Solution
Solution Summary
This solution provides a detailed discussion of the given finance questions.
Solution Preview
Hello
Differentiate between a defined-contribution pension plan and a defined-benefit pension plan. Explain how the employer's obligation differs between the two types of plans
In a defined-contribution plan, there is no mention of the benefits paid out to employers, it merely specifies the sum that the employer promises to contribute each period based on a formula that considers such factors as the length of the employee's service, age, and compensation level. A common for of such a plan is the 401 (K) plan.
A defined-benefit plan, on the other hand clearly defines the benefits the employees would receive in case of retirement and is typically based on the employees' years of service and the compensation level. Under such a plan, the company must determine the amount to be contributed to the plan (which is the present value of future benefits).
Under a Defined-Contribution plan, the employer's obligation is to make a contribution to the plan each year based on the plan formula. The benefit of gain or risk of loss from assets contributed to the plan is borne by the employee.
Under a Defined-Benefit plan, the employer's obligation is to make sufficient contributions each year to provide for the promised future benefits. Therefore, the employer is at risk to the ...
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
Recent Feedback
- "ty i have more need help with"
- "ty i have jmore i need help with"
- "great help"
- "excellent help"
- "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
Motivation
This tests some key elements of major motivation theories.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.