Week 5 - a. Chapter 20 1) Question 2 Differentiate between...

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a. Chapter 20 1) Question 2 Differentiate between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans. A defined contribution plan is “a retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. There are restrictions as to when and how you can withdraw these funds without penalties” (investopedia). There is no way to know how much the plan will ultimately give the employee upon retiring. The amount contributed is fixed, but the benefit is not. A defined benefit plan is an employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and length of employment. Investment risk and portfolio management are completely under the control of the company . There are also restrictions on when and how you these funds can be withdrawal without penalties. Both have restrictions on when and how these funds can be withdrawal without penalty. The defined benefit plan is based on a formula regarding salary history and length of employment where as the defined contribution plan is based on a percentage. 2) Question 10 Identify the five components that comprise pension expense. Briefly explain the nature of each component. Service cost;
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This note was uploaded on 04/17/2011 for the course ACCOUNTING 490 taught by Professor Santos during the Spring '11 term at University of Phoenix.

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Week 5 - a. Chapter 20 1) Question 2 Differentiate between...

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