If a pension plan is both contributory and qualified, it isfully funded by the employer and not governed by IRC.fully funded by the employee and governed by IRC.funded by both employer and employee and notgoverned by IRC.funded by both employer and employee and governed by IRC.

Answered: If a pension plan is both contributory…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

If a pension plan is both contributory and qualified, it is

fully funded by the employer and not governed by IRC.
fully funded by the employee and governed by IRC.
funded by both employer and employee and notgoverned by IRC.
funded by both employer and employee and governed by IRC.

Expert Solution

Step 1

First let us understand the key terms in the question.

Pension plan- A Pension plan is an accumulated pool of funds which is utilized to make payments to the employee at the time of retirement. Thus the whole idea is to provide financial benefits to the employee to secure his future.

Types of Pension Plan

Defined contribution Plan - This type of plan has both employee or employer or both making a defined amount of contribution from their monthly pay to the pension plan which the employee can withdraw on his retirement.
Defined benefit plan - Under this type of plan an employee is usually guaranteed a specified fixed amount at the time of his retirement. It can be a one time lumpsum payment or monthly payments.

Now lets understand what is contributory and non contributory plans.

Contributory plans - Where both employer and employee makes payment to the pool of funds on a regular basis. The contribution of the employee is deducted from the pay and the employer makes a matching contribution.
Non -Contributory plans - This type of plan is funded mostly by the employer only with no contributions from the employee.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Employee Retirement Income Security Act (ERISA)

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions