Asked by Gabrielle Richard on May 12, 2024
Verified
A pension plan provides for future retirement income based on the employee's income and length of service with the company.This type of pension plan is termed a
A) contributory plan
B) defined contribution plan
C) noncontributory plan
D) defined benefit plan
Defined Benefit Plan
A Defined Benefit Plan is a type of pension plan where the benefits that the employee will receive upon retirement are defined based on a formula involving salary history and years of service.
- Differentiate between defined benefit and defined contribution pension plans including their characteristics and accounting treatment.
Verified Answer
RA
Racer AkashMay 13, 2024
Final Answer :
D
Explanation :
A defined benefit plan is a pension plan that provides retirement income based on a specific formula that takes into account an employee's salary and length of service with the company. The employer is responsible for contributing to the plan and managing the investments, and the employee typically does not contribute to the plan.
Learning Objectives
- Differentiate between defined benefit and defined contribution pension plans including their characteristics and accounting treatment.
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