Pensions There are many different facets in todays’ accounting world that have to be taken into account. These facets range from bookkeeping, mergers and acquisitions, and taxes to stock and pensions. One concern in today’s world that has everybody worried is the thought of retirement. With inflation and prices rising, planning retirement has become even more imperative despite becoming increasingly difficult. Pensions are one form of retirement planning that is fairly reliable and easy to set up. A pension is a contract for a fixed amount of money to be paid to someone in regular installments usually following retirement. A pension is a built up over many years of service for a company and it is a combination of investments and earnings throughout the years of service. From an accounting point of view, pensions are divided up as accounting for the employer and accounting for the pension fund. There are two types of pension plans. The first is a contributory fund. With this type, the employees have part of the burden as they make payments toward their fund throughout their career. The second type of fund us called a noncontributory fund. With this the employer bears all the costs and pays for the entire fund. Which type of pension fund is used depends on how a company wants to utilize federal income tax benefits. Plans that do offer tax benefits are called qualified pension plans. These plans offer tax deductions from the employer’s contributions and tax free earnings from pension fund assets. There are two sides to pension plans and both will be looked at within this paper. The first type of pension plan is a defined contribution plan. This type of pension focuses on what the employer contributes to a pension based on a formula. This formula is based on factors such as age, length of career, profits, and compensation amount. These plans are normally referred to as 401k plans. The employer turns over the original amounts contributed to a third party. This third party is then responsible for the investment and distribution of pension fund. In this case the employee receives all the benefits or losses from the fund and the employer only contributes yearly the amount decided by a formula. This means that employer must simply make a pension expense entry every year to record the amount that was paid to the pension fund. The pension is recorded as a liability only if the employer has not paid in full the agreed amount and it is recorded as an asset if they make the full payment. Along with the entry the employer must include notes that describe the plan, the determinants of contribution, and the groups covered. The second type of pension plan is a defined benefit plan. This type of plan focuses on the benefits the employee will receive upon retirement. The company must meet the designated benefit commitments upon retirement by determining how much they need to pay in the present to provide enough in the future. This type of plan benefits the employers as its primary purpose is to safeguard and invest assets into the fund in order to pay off the employer’s determined amount to the employee. This means that as long as the plan is alive the employer is responsible for making sure there is enough payment to cover the obligated amount no matter what happens in the trust. This puts employers at risk but also gives them the greatest chance to benefit should too much be allocated to the fund. To make sure that the fund is properly funded companies hire actuaries to ensure that the plans are right for the group of employees being covered. Actuaries compute formulas based on many variables to give estimates on how much the employer needs to place into the fund to meet the obligated amount. There are multiple ways to measure the employer’s obligation to the pension plan. The first type is called vested benefits. These benefits are the benefits that the employee is guaranteed to receive even if they no longer continue…
Defined Benefit Plan & Trust
Actuarial Valuation Report as of January 1, 2013 for
the Plan Year Ending December 31, 2013
700 E. Park Blvd.
Plano, TX 75074
Total HR & Benefits Solutions
April 17, 2013
Ms. Susan Vinson
Regional Transportation Authority
5658 Bear Lane
Corpus Christi, TX 78405
Actuarial Valuation of the RTA Employees’ Defined Benefit Plan & Trust as
Pension and health care benefits provider to states and local government
employees are emsiderally broader in coverage and more geneous compared
with those for private sector emp;oyes. According to the bureau of labor
statistic’s employee compensation survey (March 2010), 84 percent of all
state and local government employees had access to a defined retirement
plan, 29 percent to a defined contribution retirement plan, and 23 percent to
both types of plans during 2009. 59…
poor management, corruption, and overall neglect. The city has been under the emergency management system since March of 2013. In July the City of Detroit filed for bankruptcy protection, the residents and retirees are fighting back to save their pensions they have worked so hard for. I believe in The City of Detroit needing financial guidance but not at the cost of its residents.
The struggling city has citizens worried but in a poll given by the Detroit Free Press of 400…
plan that far less than the 75% mark, he should realize the differences and make sure that their figures include all areas of spending.
Savings from the annual income that need at the retirement date is difficult to determine. There are different pension plans such as 401(k) plans; individual retirement plans (IRAs) or taxable investments. The employees should ensure that their savings should support the rest of their life by depending on their age. But determining the retirement age is also difficult…
Public Administration and Bureaucracy
NJ Pension Deficits: Who’s Responsible?
When it comes to the pension deficit in New Jersey the public seems to be split on who and what is responsible for this debacle. This is due to a sinister campaign of misinformation on behalf of the interests of the beneficiaries of keeping the public in the dark when it comes to their retirement money. These beneficiaries are politicians, hedge fund managers, bankers, and Wall Street investment firms. The…
employment covered by law
The aspects of employment covered by law can be divided into four different sections. They are:-
1. Health and safety at work act 1974
2. Data protection 1998
3. Employment rights and responsibilities 1996
4. Pay and pensions
1.2: List the main features of current employment legislation
Health and Safety at Work Act 1974
The Health and safety acts main feature is to provide a framework for ensuring the health and safety of all employees in any work activity. It requires…
RETIREMENT BENEFITS ANALYSIS
Why Are Pensions Important?
Benefits at Retirement
Other Post Retirement Benefits
Role of Estimation
Determining Retirement Costs
Determining Plan Obligations
Determining Plan Assets
Pension Plan Disclosures
Analysis of Retirement Plans
WHY ARE PENSIONS IMPORTANT?
Societal Implications of Retirement Benefits
Social Significance – Who is responsible…
adequacy of Social Security benefits for the succeeding generations” (Martocchio, 2011, p. 284). Whether employee benefits are discretionary or mandated by law, one of the main reasons that employers offer benefits is to attract and maintain employees to their organization. Another factor is that organizations are able to take advantage of tax advantages when offering benefits. Benefit incentives also promote employee productivity
I feel the primary reason companies offer benefits are one, some are mandated…
San Diego Pension Dials Up the Risk to Combat a Shortfall
San Diego County's Pension Manager Is Extreme Example of Those Using Leverage to
Aug. 13, 2014 8:06 p.m. ET
A large California pension manager is using complex derivatives to supercharge its bets as it
looks to cover a funding shortfall and diversify its holdings.
The new strategy employed by the San Diego County Employees Retirement Association is
complicated and potentially risky, but officials…
gearing of over 50 percent. This means that their assets are generally financed by debt. Their current ratio is quite low at 0.05 whereas the benchmark is 2.0 times. The family is therefore likely to have challenges in meeting their current financial obligations.
3 Five years from now, their financial situation is predicted as follows (in nominal
l Net annual earnings: £62,000
l Net annual expenditure: £63,000
l Home value: £262,500
l Mortgage: £140,000
l Overdraft: £500
l Shares: £1000…