PENSION PLANS

Pension Plans

Pension Plans

What is a pension plan as used in a firm and related to employee compensation?

The Pension Plan is an instrument for channeling long-term savings in order to see, mainly, at the time of retirement, private pensions to supplement public. The pension plan is another pillar of the retirement planning. This is a voluntary special service of the employer; the trend has already been lost. In time, as discussed above in which high-wage labor costs, and voluntary services in the private sector are rare.

That does not mean that you exposed to the mercy of the employer. The commitment by the employer to pay a pension is binding. However, it is possible that agreed for newcomers in a company no longer operating pension. In this case, it especially recommended, for example, by the fund from the state to make additional private pension. Incidentally, the company pension scheme by government allowances or exemption under the retirement pension plan should be encouraged (Ziesenheim, 2002).

What is the difference between a defined contribution plan and a defined benefit plan?

Defined contribution plans are plans which based on contributions. They do not promise a guaranteed income like defined benefit plans. Individual retirement accounts, 401ks, simplified employee pensions (SEPs), annuities and other investment options qualify as defined contribution plans. Some initiated by an individual planning for his retirement. This type of plan depends solely on his contributions for determining a benefit payout. Private employer pension plans often have contributions by both the employee and the employer, with varying levels of participation possible for both parties.

Whereas, a defined benefit plan provides benefits founded on an equation that generally reproduces after years of service, last mean yield, a pension rate and often a partial counteract for the prime communal security benefits the participant receives. Under a defined benefit pension plan, the pension benefit obtained by the participant characterized by the plan's equation and generally organized to provide a yearly fee throughout the life of the employee, with a decreased fee made to spouse after the worker's demise for the length of his or her life (Shulman, 2003).

What is accumulated benefit obligation and how is such associated with a projected benefit obligation?

Accumulated benefit obligation can be defined as a measure of any organization's pension plan liability. This benefit obligation projected by analysts who assume that the pension plan will cease shortly, this plan does not take into consideration any future raises in salary.

In contrast, a projected benefit obligation looks at long-term value and takes factors like salary increases into account. Projected benefit obligation assumes the present value of the future liability of an employee's pension amount. This kind of plan considers that the employees will continue working in the organization and will make contributions to the pension plan (Schulz, 2001).

What is the funded status and where is it reported?

Funded status denotes the status of the pension plan regarding accumulated assets that have been kept for compensating the retiring employees. Assets not allocated for unfunded plans also known as pay as ...