By operating separate trusts for certain benefits, companies operating under GAAP can often greatly reduce their pension liability (Kossov 2010). Pension funds must then be sued only for the payment of retirement benefits (and the earning of interest), then, rather than being combined with other benefit programs funded or operated by the company as they often are now (Kossov 2010).
It is in the area of pension assets, however, that the greatest complexities and disagreements can be found in the current era. Pension assets are used to earn interest for future pension disbursements as well as to pay out current pension disbursements owed, and because a large part of the job is to grow the wealth pool that exists as quickly yet as safely as is possible, companies have long reported pension assets and expected returns on those assets as earnings, adjusting historical statements as real data becomes available but…...
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References
Bouvier, S. (2010). Pensions Overhaul Support Depends on Boards' Continued Review. Accounting Policy & Practice 6(20): 689-91.
Comprix, J. & Muller, K. (2010). Pension plan accounting estimates and the freezing of defined benefit pension plans. Journal of accounting and economics 51(1-2): 115-33.
Fortune, P. (2005). Pension Accounting and Corporate Earnings: The World According to GAAP. Federal Reserve Bank of Boston Public Policy Discussion Paper 06-2.
Kossov, I. (2010). Pension Plans Feel Pressure to Create Post-Employment Funds. Money Management Letter,3-4
Pension Plans of Coca Cola Co. Vs. Pepsi Inc.
Compare the pension plans of Coca Cola and Pepsi, noting what type of pension, and funded status as of 2007 end of year.
A) Coca Cola Co.
This is a Defined Contribution Plan.
For its primary plan the employer matches 100% of participants contribution, up to 3% of compensation.
Benefit obligation at end of year for 2007 was $3,517 million.
Benefits paid for pensions plan were $41 million, in payments related to unfunded pension plan paid from Coca Cola Co. assets.
Defined Contribution Plan is composed of:
Employer contribution-is determined by plan
isk is borne by the employees
Benefits are based on plan value
B) Pepsi Inc.
This is a Defined Benefit Plan.
It is determined by the interest rate that is used to determine the present value of liabilities, and is the discount rate
For 2007, the Expense Discount ate was 5.7%
Expected return on plan assets was 7.7%
The pension plan contribution was $230…...
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References
Burr, Barry B. (2010, February 26) Updated Pepsi, Coke Acquisitions Bubble up Pension Plans. Pensions and Investments. New York: Crane Publications. p.48-51.
Harkonnen. (2009) Comparative Financial Analysis between Pepsico and Coca Cola.
Investing, Bukisa. 12/15/2009. Retrieved May 23,2011 from http//www.bukisa.com/articles/214196-comparitive-financial-analysis-between-pepsico- and-coca-cola.
Kieso, Weygandt, Warfield. (2007). Chapter 20: Accounting for Pensions and Post Retirement Benefits, Intermediate Accounting. 12th ed. New York: JohnWiley and Sons Inc.
Pension Liability, Costs, Recognition, and Future Developments
In measuring the liability of pension plan, it requires discounting a stream of promised future benefits to the present. The plans that relate to the public sector the discount rate used in the calculation is subject to considerable debate. Plans for state and locals follow the general actuarial model and hence, liabilities are discounted by the yield of long-term assets held in the pension fund, which is roughly eight percent. For most economists, they contend the discount rate and say that it should reflect the risk associated with the liabilities, given the benefits are guaranteed under most state laws, the most appropriate factor of discount is a rate that is riskless, roughly 5%. Therefore, the model exhibited by the economists would produce much higher liabilities than those reported on books of localities and states. The debate is intensified and fueled by the assumption that…...
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Works Cited:
Angelo, Paul. Understanding the Valuation of Public Pension Liabilities: Expected Cost vs. Market Price. Special Issue of In the Public Interest 12 (2016): 9-13. Print.
Kobal, Mark. Pension Liabilities: CNBC Explains. 14 August 2013. Web.
Munnell, Alicia, Kopcke Richard, Aubry Jean-Pierre, and Quinby Laura. Valuing Liabilities in State and Local Plans. Chestnut Hill, MA: Center for Retirement Research, 2010. Print.
Schroeder, Richard, Clark Myrtle, and Cathey Jack. Financial Accounting Theory and Analysis: Text and Cases. 11th ed. New York: John Wiley & Sons, Inc., 2014. Print.
Pension Plan Being Qualified
What are the permitted pension benefit plans?
What is the problem?
What is the solution?
The end result
The paper shall first inform that when any individual chooses a pension plan he should try to choose a plan that is qualified as the growth in value of the investments inside the plan are not taxable till the amounts are distributed to the investor, the contributions made by an employer to the plan are also deducted from tax within limits, and the permitted contributions by the employees are also not taxable till they have been given to the employee. We shall next look at the two main types of plans are called cash balance plans and 401(k) plans. Among the two, cash balance plans are supposed to have definite benefits at the end of a certain number of years, and 401(k) plans require the contributor to make definite contributions. Apart from…...
Retirement Options
403B
A 403b is delineated as a tax-deferment retirement plan. Basically, it permits an individual to set aside pre-tax dollars from the employee’s paycheck to save for retirement. The employee will be able to save up to $16,500 every year and depending on the career advancement, the limit might become higher.
401K
A 401(k) is basically a retirement savings plan for the employee that is sponsored by the employer. It permits the employee to save and invest a portion of their paycheck prior to taxes being deducted. Basically, taxes are not remitted until the amount is withdrawn from the account. With this particular retirement plan option, the employee is able to control the manner in which his or her money is investment. A majority of the plans offer the employee a spread of mutual funds comprising of stocks, bonds as well as money market investments. In spite of the fact that a…...
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References
CNN Money. (2019). The ultimate guide to retirement: What is an annuity? Retrieved from: Fidelity. (2019). What is an IRA? Retrieved from: https://www.fidelity.com/building-savings/learn-about-iras/what-is-an-iraKagan, J. (2018). Estate Planning. Investopedia. Retrieved from: https://www.investopedia.com/terms/e/estateplanning.aspKagan, J. (2019). Pension Plan. Investopedia. Retrieved from: https://www.investopedia.com/terms/p/pensionplan.aspWall Street Journal. (2019). What Is a 401(k)? Retrieved from: http://guides.wsj.com/personal-finance/retirement/what-is-a-401k/https://money.cnn.com/retirement/guide/annuities_basics.moneymag/index.htm
The school was founded in 1839 and is Missouri's largest research university offering more than 280 degree programs (Mizzou, N.d.). The school is also the largest employer in the area with more than thirteen thousand full-time employees. The Retirement Trust and the Other Post-Employment Benefits (OPEB) Trust hold the assets of the Retirement Plan and the OPEB Plan. The university is require to fully comply with the GASB reporting requirements and the Trusts are managed by external firms that are restricted to investing in certain asset sectors.
The externally-managed Trust funds are allowed to invest in asset sectors such as U.S. And international equity, emerging markets debt and equity, absolute return strategies, private equity, real estate, global fixed income, high yield fixed income, bank loans, and Treasury inflation protected securities (University of Missouri, 2011). This fund represents the pension and OPEB benefits for a wide variety of different…...
Moreover, there are less children being born than in previous generations. This creates a situation where the current and future workforce will be unable to support the growing aging population. Current statistics show that there is far below the average of 2.1 children per household, which would be considered the replacement rate (Jackson & Howe 2008). For almost the entire 20th century, nations all over the world saw continuous population growths, with more being people being born than dying. Yet, today, this population growth has declined in a number of major regions, including many European nations. This then means that there will be fewer individuals in the younger workforce that should be helping support the elderly population by adding in funds to pension plans. Current structures are under the pay-as-you-go plan, where today's workers pay for today's retirees in hopes that future workers will do the same for them (Slater…...
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References
Jackson, R., (2002) The Global Retirement Crisis. Washington: Center for Strategic and International Studies.
Jackson, R. And Howe, N., (2008). The Graying of the Great Powers: Demography and Geopolitics in the 21st Century. Washington: Center for Strategic and International Studies, p.4.
Slater, R., (2008). The Pensions Time Bomb. Oxford: Oxford University Press, pp. 81-82.
Wells, N., (2005). The Ageing Population. London: The Stockton Press.
Pension Terminology Definitions & Discussion
The author is asked to define a number of terms relative to pension accounting and its associated terminology and definitions. The terms the author asked to define, in order, are service cost, interest cost, actual return on planned assets, amortization of unrecognized gains/losses and amortization of the transition amount.
Service cost is the present value, from an actuarial standpoint, of the projected benefits that can be associated with an employees' tenure at a pension-using employer during the current year. This is very similar to normal cost. Interest cost is the increase in projected benefit obligation (PBO) associated with the lapse of time as the year goes on. Generally speaking, the interest cost is gained by multiplying the discount rate by the PBO applicable at the beginning of the year.
Actual return on plan assets is what it sounds like. It is the "actual" results that are gained after…...
The UK has been indicated by Aviva (2011) to be facing a significant change in population with a large number of the older citizens approaching their retirement. The current retirement market is in a downward spiral with its trend of failing today's generation of UK retirees. The trend has been predicted to be on the rise and is noted to have potentially devastating consequences for the retiree's income as well as the general security of the future generation of baby boomers/retirees. In order to illustrate the intensity of the problem, it is worth noting that 385,00 individuals bought annuities last year alone (2010) and the figures indicated that only about 32% of the clients bough annuities from firms that are different to the ones that they saved with. In this paper we critically…...
Essay Topic Examples
1. The Impact of Gender on ension Inequality in Malaysia:
This essay will explore how gender disparities contribute to pension inequality in Malaysia. It will examine the roots of the gender pay gap, traditional gender roles affecting employment patterns, and how these factors lead to women receiving lower pension benefits than men. Statistical data regarding labor market participation and gender-specific retirement savings will be analyzed to evaluate the long-term implications for gender-based pension inequality.
2. ublic vs. rivate Sector ension Disparities:
This topic discusses the differences in pension schemes between public and private sector employees in Malaysia. It will evaluate the structure of the Employees rovident Fund (EF) and the public sector pension scheme, comparing their effectiveness in providing adequate retirement income. Factors contributing to the varying degrees of security and generosity between the sectors will be analyzed to understand how they perpetuate pension inequality.
3. The Effect of Ethnicity on ension…...
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Primary Sources
Employees Provident Fund Malaysia. \"Annual Report 2020.\" Kumpulan Wang Simpanan Pekerja, 2021.
Ministry of Finance Malaysia. \"Economic Outlook 2021.\" Percetakan Nasional Malaysia Berhad, 2020.Department of Statistics Malaysia. \"Malaysia Social Statistics Bulletin.\" Jabatan Perangkaan Malaysia, 2020.Bank Negara Malaysia. \"Financial Stability and Payment Systems Report 2020.\" Bank Negara Malaysia, 2021.Malaysian Parliament. \"Hansard Report: Parliamentary Debate on Pension Fund Inequalities.\" Parlimen Malaysia, 2021.
Pension Plan eplacement ates
Public Pension eplacement ates
The portion of monthly pre-retirement income that will be replaced by monthly pension plan funds is called the pension plan replacement rate (Quadagno, 2011). In the United States, the majority of pre-retirement income replacement comes from Social Security payments (Quadagno, 2011). The actual replacement rate for wage earners with lower incomes is higher than for those who have had higher wages during their working years (Quadagno, 2011). But overall, wealthier recipients of Social Security payments still achieve higher income replacement (Quadagno, 2011). "By 2030, a worker who retires at age 62 will receive only 70% of the whole retirement benefit, and workers who want to receive the maximum benefit will have to wait until they reach age 67" (Quadagno, 2011, p. 10). How does this compare with the situation in other countries? Comparing prior earning replacement rates for Greece and the United States, for…...
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References
Current and Prospective Theoretical Pension Replacement Rates. (2006, May 19). Social Protection Committee (SPC), European Commission: Employment, Social Affairs, and Inclusion. Retrieved http://ec.europa.eu/employment_social/
social_protection/docs/isg_repl_rates_en.pdf
Nektarias, M. (). Financing public pensions in Greece. SPOUDAI, 50 (3-4), University of Piraeus.
Nelson, R.M., Belkin, P., Mix, D.E. (2011, August 18). Greece's Debt Crisis: Overview, Policy Responses, and Implications. Washington, D.C.: Congressional Research Service. Retrieved http://www.fas.org/sgp/crs/row/R41167.pdf
Function of a benefit plan and a pension plan is to provide income for an individual after he or she retires from work. There are plans that provide more benefits than mere pension and these are called benefit plans. There are for example the vested termination benefits, disability benefits, and they can be defined plans or defined benefits based on the type of the plan that is being chosen. The defined contribution plan defines the method and type of benefit that accrues to the employee over the years. (Winklevoss, 1993) In other words it has a defined amount or quantity that may be fixed. Benefits on the other hand are extra given to a person opting for a plan. The benefit plans are protected by federal insurance of the Pension Benefit Guaranty Corporation -- PBGC.
Define the purpose and function of a contribution plan
The contribution plan is not based on any…...
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References
Ellig, Bruce. R. (2004) "The Complete Guide To Executive Compensation" Tata
McGraw-Hill Education.
Graham, Avy D. (1998) "How has vesting changed since passage of Employee
Qualified Benefit Plans
Why company set qualify benefit plans tax benefits company employees maintaining qualify plans. Also, company comply benefit laws regulations order maintain qualify status plan.
Employers sometimes offer their employees and other beneficiaries within the organization retirement plans which they sponsor. These are often referred to as qualified plans. These qualified plans are either established as defined benefit plans or defined contribution plans. When established as defined benefit plans, the employee receives benefits on a formula that factors in personal factors such as the employee's salary history and the duration of contract or employment. In these plans, the risk of investment and management of the portfolio is run by the employer. In these schemes, the employer sometimes has to find funds from alternative sources such as the company's profits in order to fund employee's retirement when there is a shortfall in funding. The other type of qualified plans is the…...
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References
Brown, J.R., Mitchell, O.S., Poterba, J.M., & Warshawsky, M.J. (1999). Taxing Retirement Income: Nonqualified Annuities and Distributions from Qualified Accounts. National Tax Journal, 52(3), 563-591. doi: 10.2307/41789742
Huberman, G., & Jiang, W. (2006). Offering vs. Choice in 401(k) Plans: Equity Exposure and Number of Funds. The Journal of Finance, 61(2), 763-801. doi: 10.2307/3699357
Lipman, J.H. (1983). Valuing Defined Contribution Plans. Family Advocate, 5(4), 19-21. doi: 10.2307/25806070
Lisa Meulbroek. (2005). Company Stock in Pension Plans: How Costly Is It? Journal of Law and Economics, 48(2), 443-474. doi: 10.1086/430807
UK Pensions Policy" - Social Policy Area
The pension policy of the UK is one that is followed as a model by various other parts of the world for its efficient dealing with the problem of pensions for the aged of the UK. The government takes a ken interest in reforms in the area of pensions, and it was for this reason that it announced the latest set of reforms in the year 2000, in its 'pre-budget report' that was released in the month of November of the same year. The report contained a series of reforms and improvements for pensioners. Some of the measures were: increases in the pensions according to the above- inflation rates, above inflation increases in the rates of the 'minimum income guarantee', also known as the MIG, and the introduction of the newly formulated 'pension credit' that was basically a means tested benefit for the…...
Accounting for Postretirement Health Care and Life Insurance Benefits necessitates disclosures regarding an employer's accounting. These include a delineation of the provision of benefits and the groups of employees given coverage, a delineation of the employer's prevailing accounting and financing policies for such benefits and lastly the cost of such benefits acknowledged for the period. In particular, this is effective for the financial statements prepared by organizations for the financial period ending subsequent to December 15, 1984 with respect to postretirement health care and life insurance benefits that are provided not only in the United States but also international nations. Nonetheless, for financial periods prior to June 15, 1985 that lack data and information regarding benefits provided in foreign nations, it is not mandatory to include them (FASB, 2017).
Moreover, the net pension liability or net pension assets have to be included in the financial statements as an asset or liability…...
Prioritizing Citizen Well-being in Developed Societies: A Comprehensive Approach
In the tapestry of a developed society, the well-being of its citizens stands as a paramount value. To ensure their prosperity and fulfillment, these societies adopt a multifaceted approach that encompasses both material and non-material aspects of life.
1. Comprehensive Healthcare System:
Access to quality healthcare is a fundamental right. Developed societies establish universal or comprehensive health systems that provide accessible, affordable, and equitable medical services. This includes preventive care, chronic disease management, and emergency treatments. By prioritizing healthcare, societies invest in the health and longevity of their citizens.
2. Education for All:
Education empowers citizens....
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