University of Phoenix
It is in the best interest of the business to get outstanding people as part of their team. It makes business flow efficient, which returns higher income. Offering benefits, such as pension plans, is the key to ensure that these outstanding employees will stay with the company. There are two main pension plan categories. These are defined contribution and benefit plan. Defined contribution plan is retirement plan offered to employees where both employees and employer contribute to the pension fund. However, employer is not required to match employees’ contributions. Under this plan, employees manage the investments. An example of this is 401K. Benefit plan is a pension where employers hold the pension trust and in most cases is the only one who contributes. It is a guaranteed fund regardless of the decline in investments. An actuary is contracted due to uncertainties that are tied to the plan and complexities of benefit plan calculation ("Pensions and other," n.d.).
A pension expense report tells a company’s annual cost for maintain their employee’s pension plans. A pension plan expense contains several components including service cost which is a liability incurred every year of completed employment that an employee does for a company. Interest cost is the next component that represents accumulated interest on an unpaid balance of benefits expenses that are projected for an employee as their employment time lengthens. The third component is the return on plan assets that consists of stocks, bonds, and other investments. Other components include amortization of prior service costs, and gains and losses from the stability and health of the financial market.
Employees’ benefits are tied to expenses. Therefore, offering pension benefits affect the finances of the company. The company needs to ensure that the benefits of offering pension overweigh the costs. To appropriately...