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Chapter 20: Question 28Q (page 1161)

What are the major differences between postretirement healthcare benefits and pension benefits?

Short Answer

Expert verified

A single-life pension plan is the type of plan offered by an organization to its employees where the amount of pension will be payable to an employee until their death.

Step by step solution

01

Introduction

The following terms, pension benefits and post-retirement healthcare benefits, are significantly different in various terminologies. Some of the main differences are as below.

02

Differentiating between the post-retirement healthcare benefits and pension benefits

Basis

Pension benefits

Postretirement healthcare benefits

Meaning

These types of benefits are offered other than the pension to the employees.

These benefits are related to the pension plan taken by an employee.

Service years

Related to the number of years of service.

Not related to the years of service.

Costs

Paid by the employer

Paid by both employer and employee

Other benefits

Provides vesting benefits

Does not provide vesting benefits

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Most popular questions from this chapter

In computing the interest component of pension expense, what interest rates may be used?

At December 31, 2017, Besler Corporation had a projected benefit obligation of \(560,000, plan assets of \)322,000, and prior service cost of $127,000 in accumulated other comprehensive income. Determine the pension asset/liability at December 31, 2017.

Andrews Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2017 are as follows. Future Employee Years of Service Jim 3 Paul 4 Nancy 5 Dave 6 Kathy 6 On January 1, 2017, the company amended its pension plan, increasing its projected benefit obligation by $72,000. Instructions Compute the amount of prior service cost amortization for the years 2017 through 2022 using the years-of-service method, setting up appropriate schedules.

Towson Company has experienced tough competition for its talented workforce, leading it to enhance the pension benefits provided to employees. As a result, Towson amended its pension plan on January 1, 2017, and granted past service costs of \(250,000. Current service cost for 2017 is \)52,000. Interest expense is \(18,000, and interest revenue is \)5,000. Actual return on assets in 2017 is \(3,000. What is Towson’s pension expense for 2017? (a) \)65,000. (c) \(317,000. (b) \)302,000. (d) $315,000.

Why didn’t the FASB cover both types of post-retirement benefits—pensions and healthcare—in the earlier pension accounting rules?
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