Defined benefit pension plan belongs in a plan-specific employer file. A defined benefit pension plan promises retirement benefits under a formula. The employer uses actuarial obligation measures, restricted plan assets, periodic cost, OCI and AOCI, and funded status because it bears the promise's measurement risk.
Apply it
A plan that pays 1.5 percent of final salary for each service year is benefit-defined even if the employer also contributes a fixed amount to its trust each year.
Common mistake
Do not assume that the employer's contribution is its defined benefit pension expense. Contribution, periodic cost, and funded status come from separate schedules and can differ in the same period. That error would make cash policy appear to determine both periodic cost and the balance-sheet liability.
Keep the boundary clear
The contribution policy does not turn a benefit promise into a defined contribution plan. Actuarial measurement, legal funding, and sponsor solvency remain separate questions.
Authority
Read ASC 715-30-35-1A for measurement of the projected benefit obligation.
Put the concept to work
Apply this concept
- Explain and apply defined benefit pension plan within a reconciled employer benefit-plan workpaper using supplied authoritative and actuarial facts.
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Build on these ideas
- Employee benefit arrangement — Apply
To apply this concept: Required. This prior concept supplies the plan route or reconciled input required here.
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Use this idea next
- Accumulated benefit obligation — Apply
Required level here: apply. Required. This prior concept supplies the plan route or reconciled input required here.
- Pension plan amendment — Apply
Required level here: apply. Required. This prior concept supplies the terms, date, or measurement needed here.
- Projected benefit obligation — Apply
Required level here: apply. Required. This prior concept supplies the plan route or reconciled input required here.
Show 2 more next steps
- Single-employer defined benefit plan — Apply
Required level here: apply. Required. This prior concept supplies the plan route or reconciled input required here.
- Vested benefit obligation — Apply
Required level here: apply. Required. This prior concept supplies the plan route or reconciled input required here.