Question

With regard to current GASB standards for pension reporting: Distinguish between (1) defined contribution plans and (2) defined benefit plans. Distinguish between defined benefit pension reporting for (1) governmental fund statements and (2) for enterprise fund and government-wide statements.

Answer 1

Defined Contribution Plan and Defined benfits plan are two plans for calculating the Employee benfits., though there some differences among those two., following are the differences

Defined Benfit Plan : (DBP)

-its a very popular method

- According to DBP, Employee will recieve some specified amount after retirement in fequent intervals., it starts after the retirement date..

- its less risky compare with DCP, in this case employer will pay some fixed amount irrespective of other things some employee can also prepare mentally to recieve such amount and plan accordingly

- this amount is depend on the top years salary of the emplyee(means salary immediately before the retirement)

Ex : Employee will recieve $1000/- every month- (Irrespective of sales and profits of the organisation) from his employer

Defined Contribution Plan : (DCP)

its another type of retirement plan to the employee recieved from his employer.,

-In this case Employer has to pay some fixed amount to the pention fund when he employee is in the employment itself,irrespective of whethe amount available in the pension fund is sufficient of excess for all the employees

-its risky compare with DBP, because employer will not give some fixexd amount to the employee it will fluctuate time to time.,

- this vlue depend on the contribution to be paid by the employer after employee's retirement.,