In: Accounting
Which of the following is a characteristic of pension plans that does not apply to profit sharing plans?
a. Separate accounts.
b. In-service withdrawals for select employees, plan permitting.
c. Limited investment in life insurance.
d. Mandatory funding.
Solution:
Mandatory funding is a characteristic of pension plans that does not apply to profit sharing plans because, in profit sharing plan contribution is made by employer on the basis of Firm's profit.
Hence option d is correct.