Pensions

Question 1

What are the characteristics of a defined contribution plan

Answer 1

Regular contributions that are defined and paid in by employer and employees

What is paid to employees depends on how well the plan investments perform

The employer bears the risk

Question 2

What are the characteristics of a defined benefit plan

Answer 2

Size of the benefit is defined (determined in advance)

If assets are insufficient, employer required to make additional contributions to make up the shortfall

Employer bears the risk

Question 3

Which line items have an effect on the P/L for a defined benefit pension plan

Give the classification of the expense or income

Answer 3

Current service cost&raquo_space; admin
Past service cost&raquo_space; admin
Interest cost on plan assets&raquo_space; fin income
Interest cost on obligations&raquo_space;> fin cost

OCI
Remeasurement gains/ losses