Pensions & Post-Retirement Benefits Flashcards

Pensions & Post-Retirement Benefits Flashcards
1/16 (missed) 0 0
Create Your Account To Continue Studying

As a member, you'll also get unlimited access to over 79,000 lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help you succeed.

Try it risk-free
Try it risk-free for 30 days. Cancel anytime
Already registered? Log in here for access
Your company has a defined contribution pension plan. At the beginning of the year it makes a matching payment of $1,000 to employees. How is this recorded?

Debit $1,000 to the Pension expense account and credit $1,000 to the Pension liability account.

Got it
Defined Benefit Pension Plan

A pension plan that does not give each employee a separate account. In these plans, employees receive specific, set benefits when they retire.

Got it
Defined Contribution Pension Plan

These pension plans are sponsored by the company. Each employee gets his or her own account. Employees face the risk of market fluctuations with these plans.

Got it
Finding Defined Benefit Expense: Formula

Service cost + interest + amortization of past service cost + deferred gain - estimated return on plan assets - deferred loss

Got it
Actuarial Assumptions

These estimates are used when deciding what benefits will be offered with a defined benefit plan. They may focus on employee lifespans, medical conditions and ages.

Got it
Service Cost

The amount of money a company with a defined benefit plan must put aside in its present accounting period. This has to match your employees' accrued retirement benefits.

Got it
Return on Plan Assets

This deals with the income, interest and dividends associated with the assets your company holds solely to fund employee retirement.

Got it
Post-Employment Benefits / Post-Retirement Benefits

These are benefits that are given to employees after their employment ends. Examples might include pensions, medical insurance and life insurance.

Got it
16 cards in set

Flashcard Content Overview

This set of flashcards can be used as a study aid to help you go over the differences between defined contribution pension plans and defined benefit pension plans. You'll be able to focus on cash balance plans and 401(k) plans as well. Furthermore, these cards give you the chance to review the performance incentives that companies can offer to employees, including:

  • Gain sharing
  • Profit sharing
  • Stock options
Front
Back
Post-Employment Benefits / Post-Retirement Benefits

These are benefits that are given to employees after their employment ends. Examples might include pensions, medical insurance and life insurance.

Return on Plan Assets

This deals with the income, interest and dividends associated with the assets your company holds solely to fund employee retirement.

Service Cost

The amount of money a company with a defined benefit plan must put aside in its present accounting period. This has to match your employees' accrued retirement benefits.

Actuarial Assumptions

These estimates are used when deciding what benefits will be offered with a defined benefit plan. They may focus on employee lifespans, medical conditions and ages.

Finding Defined Benefit Expense: Formula

Service cost + interest + amortization of past service cost + deferred gain - estimated return on plan assets - deferred loss

Defined Contribution Pension Plan

These pension plans are sponsored by the company. Each employee gets his or her own account. Employees face the risk of market fluctuations with these plans.

Defined Benefit Pension Plan

A pension plan that does not give each employee a separate account. In these plans, employees receive specific, set benefits when they retire.

Your company has a defined contribution pension plan. At the beginning of the year it makes a matching payment of $1,000 to employees. How is this recorded?

Debit $1,000 to the Pension expense account and credit $1,000 to the Pension liability account.

Performance Incentives

These are rewards offered to employees when a company does well. Examples can include stock options, gain sharing and profit sharing.

Performance Incentives: Stock Options

A performance incentive that involves giving employees a chance to buy shares in a company at a specific price. This does not require a large payout from the company.

Performance Incentives: Gain Sharing

Companies use this performance incentive to encourage employees to be more efficient. It focuses on cost savings instead of improving net income.

Performance Incentives: Profit Sharing

Used to encourage increasing net income, this performance incentive works by dividing a set percentage of the net income between employees. Thus, larger net income equals greater payout per employee.

You have a gain sharing plan. Your employees lower shipping costs from 20% to 15% for the year. Your total COGS was $50,000. What amount will your employees get from these savings?

$50,000 x 20% = $10,000. $50,000 x 15% = $7,500. $10,000 - $7,500 = $2,500 for employees.

10 years ago you were given the option to buy 100 shares at the then price per share of $10. It is worth $20 per share now and you're ready to exercise your option to purchase. What is your benefit value?

100 x $20 = $2,000.

100 x $10 = 1,000.

$2,000 - $1,000 = $1,000 as a benefit value.

401(k) Plan

A very common kind of defined contribution plan. Employee contributions are tax deferred and employers are allowed to match the employee contributions.

Cash Balance Plans

This is one type of defined benefit plan. However, it's benefits are usually described as they would be if it were a defined contribution plan.

To unlock this flashcard set you must be a Study.com Member.
Create your account

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member

Already a member? Log In

Support