This post addresses issues related to benefit plans.
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What are the differences and similarities between a defined contribution plan and a defined benefit plan? As an employee, would you rather have a defined contribution plan or a defined benefit plan? Explain why. As an employer, would you rather offer a defined contribution plan or a defined benefit plan? Explain why.
Discuss how the accounting for an employer's defined benefit plan differs from accounting for the defined benefit's pension fund itself. Discuss how the accounting for an employer's defined contribution plan differs from accounting for the defined contribution fund(s) itself (themselves).
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The solution thoroughly discusses each question regarding benefit plans. All topics asked in the questions are discussed in this solution.
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A defined contribution plan is a pension plan where the employer makes an annual contribution to the pension plan in a specified amount that is fixed. The employee can also choose to make contributions into the plan, which come out as contributions from the employee's earnings, and therefore providing a tax savings to the employee. If the money comes out pre-tax, there is a tax savings to the employee, and if the amounts come out post-tax, the employee is able to take advantage of the retirement contribution credit. The most common example of a defined contribution plan is an IRA or a 401k.
A defined ...
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