Question

1. How companies account for defined benefit, defined contribution, and postretirement benefit plans?

Answer 1

1.)

Defined-benefit plans define the benefit ahead of time: a monthly payment in retirement, based on the employee's tenure and salary, for life. Usually, the funding expense accrues entirely to the company. Employees are not expected to contribute to the plan, and they do not have individual accounts

2.)

Defined-contribution plans are funded primarily by the employee. But many employers make matching contributions to a certain amount. The most common type of defined-contribution plan is a 401(k). Participants can elect to defer a portion of their gross salary via a pre-tax payroll deduction to the plan, and the company may match the contribution if it chooses, up to a limit it sets.

3.)

All forms of consideration given to employees for their services are employee benefits. They include post-employment benefits, short-term and long-term benefits, as well as termination benefits. Post-employment benefits are also known as post-retirement benefits. They refer to the compensation received by your workers at the end of their employment, except if due to termination.

Post-retirement employment benefits might include pensions and lump sum payments upon employees' retirement. They might also cover post-employment life insurance and post-retirement medical care.