Pension Plan Design and Accounting Quiz
Test your knowledge on pension plan assets, liabilities, funding, and accounting practices with these essential questions on pension accounting.
#1
2. What is the primary purpose of a pension plan?
To generate revenue for the government
To provide retirement benefits to employees
To fund charitable organizations
To invest in real estate
#2
1. Which financial statement reports a company's pension plan assets and obligations?
Income Statement
Balance Sheet
Cash Flow Statement
Statement of Retained Earnings
#3
4. How are pension plan contributions typically accounted for?
As a liability on the balance sheet
As revenue on the income statement
As an expense on the income statement
As an asset on the balance sheet
#4
7. What is the vesting period in a pension plan?
The period during which the plan is actively managed by trustees.
The period during which an employee earns the right to receive pension benefits.
The period during which the plan assets are invested in the market.
The period during which the employer contributes to the plan.
#5
8. How does a pension plan affect a company's financial statements?
It has no impact on financial statements.
It only affects the income statement.
It only affects the balance sheet.
It impacts both the income statement and balance sheet.
#6
12. In a multi-employer pension plan, who is responsible for the plan's overall management and administration?
The government.
Individual employers.
Plan participants.
An independent pension trustee or board.
#7
3. What is the funding status of a pension plan?
The ratio of plan assets to plan obligations
The rate of return on plan investments
The total number of plan participants
The history of the pension plan
#8
5. What is the role of actuaries in pension plan design?
To invest plan assets in the stock market
To calculate and assess risks related to the plan
To manage employee contributions
To handle pension plan audits
#9
6. What is the difference between a defined benefit and a defined contribution pension plan?
Defined benefit plans guarantee a specific retirement benefit, while defined contribution plans specify the employer's contribution amount.
Defined contribution plans guarantee a specific retirement benefit, while defined benefit plans specify the employer's contribution amount.
Both defined benefit and defined contribution plans guarantee specific retirement benefits.
Neither defined benefit nor defined contribution plans guarantee specific retirement benefits.
#10
9. What is the purpose of the Pension Benefit Guaranty Corporation (PBGC) in the United States?
To regulate pension plan investments.
To provide pension plan insurance and protect participants in case of plan termination.
To manage pension plan contributions.
To audit pension plans for compliance.
#11
10. What is the impact of changes in interest rates on pension plan liabilities?
Higher interest rates decrease liabilities.
Higher interest rates increase liabilities.
Interest rates have no impact on liabilities.
Interest rates only impact plan assets.
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