#1
2. What is the primary purpose of a pension plan?
To provide retirement benefits to employees
ExplanationPension plans aim to offer financial support to employees upon retirement, ensuring a source of income.
#2
1. Which financial statement reports a company's pension plan assets and obligations?
Balance Sheet
ExplanationThe balance sheet provides a snapshot of a company's financial position, including pension plan assets and obligations.
#3
4. How are pension plan contributions typically accounted for?
As an expense on the income statement
ExplanationContributions are treated as an expense on the income statement, impacting the company's profitability.
#4
7. What is the vesting period in a pension plan?
The period during which an employee earns the right to receive pension benefits.
ExplanationVesting period is the time employees must work to secure entitlement to pension benefits.
#5
8. How does a pension plan affect a company's financial statements?
It impacts both the income statement and balance sheet.
ExplanationPension plans influence financial statements by affecting income, expenses, and overall financial position.
#6
12. In a multi-employer pension plan, who is responsible for the plan's overall management and administration?
An independent pension trustee or board.
ExplanationAn independent trustee or board manages and administers multi-employer pension plans, ensuring fair representation.
#7
3. What is the funding status of a pension plan?
The ratio of plan assets to plan obligations
ExplanationThe funding status indicates the financial health of a pension plan, comparing assets to obligations.
#8
5. What is the role of actuaries in pension plan design?
To calculate and assess risks related to the plan
ExplanationActuaries analyze and manage risks, calculating factors like life expectancy and investment risks in pension plans.
#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.
ExplanationDefined benefit plans promise a fixed benefit, while defined contribution plans set employer contributions with no guaranteed benefit.
#10
9. What is the purpose of the Pension Benefit Guaranty Corporation (PBGC) in the United States?
To provide pension plan insurance and protect participants in case of plan termination.
ExplanationPBGC safeguards pension participants by providing insurance and support in the event of plan termination.
#11
10. What is the impact of changes in interest rates on pension plan liabilities?
Higher interest rates increase liabilities.
ExplanationRising interest rates raise pension plan liabilities, affecting the amount the company needs to fulfill future obligations.