Which of the following is not a characteristic of a defined-contribution pension plan?
a. The employer's contribution each period is based on a formula.
b. The benefits to be received by employees are determined by an employee's highest compensation level defined by the terms of the plan.
c. The accounting for a defined-contribution plan is straightforward and uncomplicated.
d. The benefit of gain or the risk of loss from the assets contributed to the pension fund is borne by the employee.
Answer: The benefits to be received by employees are determined by an employee's highest compensation level defined by the terms of the plan
Vested benefits
a. usually require a certain minimum number of years of service.
b. are those that the employee is entitled to receive even if fired.
c. are not contingent upon additional service under the plan.
d. are defined by all of these answers.
Answer: are defined by all of these answers
In accounting for a defined-benefit pension plan
a. an appropriate funding pattern must be established to ensure that enough monies will be available at retirement to meet the benefits promised.
b. the employer's responsibility is simply to make a contribution each year based on the formula established in the plan.
c. the expense recognized each period is equal to the cash contribution.
d. the liability is determined based upon known variables that reflect future salary levels promised to employees.
Answer: an appropriate funding pattern must be established to ensure that enough monies will be available at retirement to meet the benefits promised
