Acct316 Exam 3 | exam review 2024
1. What is a pension plan: an arrangement where an employer provides payments to employees after
they retire for services they did while working
2. What is a Contributory Pension Plan?: employees voluntarily make payments to increase their
benefits
3. What is a Noncontributory Pension Plan?: The employer bears the entire cost
4. What is a qualified pension plan?: tax benefits are offered
5. What are the types of pension plans?: A defined-contribution plan and a defined-benefit
plan
6. What is a defined-contribution plan?: The employer's contribution is defined based on a
formula. These benefits are based on a plan value ultimately make no promise to the employee of
what they will get paid.
ex. 401k plan
7. What is a defined-benefit plan?: The benefit given to employee is determined ahead of time. The
trust is considered a separate entity so if they can't make up their part the employers have to come up
wit it. The benefits determined ahead of time are thought of by the actuary.
8. What are Actuaries?: Very skilled individuals that use predictions they make to determine the
benefits given to employees for the pension plan. The probabilities are determined through mortality
rates, employee turnover, interest and earning rates, early retirement frequency, and future salaries.
9. What is the vested benefit obligation?: The pension obligation is determined by the benefits vested
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, Acct316 Exam 3 | exam review 2024
to the employees based on their current salaries. Employees have access to benefits that are vested even
if they aren't employed at company anymore.
10.What is the accumulated benefit obligation?: The pension obligation for employees is
determined by benefits both vested and nonvested to employees based on their current salaries.
11.What is the projected benefit obligation?: The pension obligation for employ- ees is determined
by benefits both vested and nonvested to employees based on their future salaries. This is usually a
larger pension obligation since future salaries are expected to be larger
12.How is a pension asset reported on the balance sheet?: As an overfunded status of the defined
benefit pension plan
13.How is a pension liability reported on the balance sheet?: As an underfund- ed status of the
defined benefit pension plan
14.How is the status of a defined benefit pension planned determined?: Fair value of plan assets
- projected benefit obligation
15.What are the components of the pension expense?: Service costs (increas- es), interest on
liability (increases), actual return on plan assets (usually decreases),
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1. What is a pension plan: an arrangement where an employer provides payments to employees after
they retire for services they did while working
2. What is a Contributory Pension Plan?: employees voluntarily make payments to increase their
benefits
3. What is a Noncontributory Pension Plan?: The employer bears the entire cost
4. What is a qualified pension plan?: tax benefits are offered
5. What are the types of pension plans?: A defined-contribution plan and a defined-benefit
plan
6. What is a defined-contribution plan?: The employer's contribution is defined based on a
formula. These benefits are based on a plan value ultimately make no promise to the employee of
what they will get paid.
ex. 401k plan
7. What is a defined-benefit plan?: The benefit given to employee is determined ahead of time. The
trust is considered a separate entity so if they can't make up their part the employers have to come up
wit it. The benefits determined ahead of time are thought of by the actuary.
8. What are Actuaries?: Very skilled individuals that use predictions they make to determine the
benefits given to employees for the pension plan. The probabilities are determined through mortality
rates, employee turnover, interest and earning rates, early retirement frequency, and future salaries.
9. What is the vested benefit obligation?: The pension obligation is determined by the benefits vested
1/
, Acct316 Exam 3 | exam review 2024
to the employees based on their current salaries. Employees have access to benefits that are vested even
if they aren't employed at company anymore.
10.What is the accumulated benefit obligation?: The pension obligation for employees is
determined by benefits both vested and nonvested to employees based on their current salaries.
11.What is the projected benefit obligation?: The pension obligation for employ- ees is determined
by benefits both vested and nonvested to employees based on their future salaries. This is usually a
larger pension obligation since future salaries are expected to be larger
12.How is a pension asset reported on the balance sheet?: As an overfunded status of the defined
benefit pension plan
13.How is a pension liability reported on the balance sheet?: As an underfund- ed status of the
defined benefit pension plan
14.How is the status of a defined benefit pension planned determined?: Fair value of plan assets
- projected benefit obligation
15.What are the components of the pension expense?: Service costs (increas- es), interest on
liability (increases), actual return on plan assets (usually decreases),
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