Pension plans must meet complex rules to retain their tax-advantaged status. These rules include all of the following except:
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A: Refer to the explanation block Explanation:
Pension plans must meet complex rules to retain their tax-advantaged status. These rules include all of the following except:
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Employee and employer contributions must fully vest within five years.
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The plan must not discriminate in favor of highly compensated employees.
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The plan must adequately cover rank-and-file employees.
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The plan must be established for the exclusive benefit of employees and their beneficiaries.
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- Which of the following is not a characteristic of a defined-contribution pension plan? The employer's contribution each period is fixed. If the employer does not make contribution in full, then it reports a pension liability. If the employer contributes more than the required amount, then it reports a pension asset. An appropriate funding pattern must be established to ensure that the promised benefits at employees’ retirement will be met. The benefit of gain or the risk of loss from the assets contributed to the pension fund are borne by the employee.The Employee Retirement Income Security Act (ERISA) was established to provide: Question 16 options: a) funding for retirement plans. b) mandatory retirement plans for self-employed individuals. c) protection to employees participating in private employer retirement plans. d) individual trust funds for employees retiring from jobs in the federal government. e) the ability to retain the same retirement insurance when employees change employers.1. Plans qualifying for preferential tax treatment must meet minimum participation and vesting requirements. T/F 2. To obain special tax treatment, a company's pension plan must be "qualified." T/F 3. Which one of the following is not true of the Employee Retirement Income Security Act (ERISA)? It sets the minimum standards and requirements that the pension plan must meet. It seeks to ensure that all employees covered by pension plans receive the benefits due them under the plans. It does not apply to employee benefit plans that are established by federal, state, or local government employers. It requires an employer to provide a pension plan for its employees. 4. Which of the following is not true of the Employee Retirement Income Security Act (ERISA)? Group of answer choices It sets standards of conduct and responsibility upon pension fund fiduciaries. It applies to plans maintained solely for the purpose of complying with state workers'compensation. It requires pension plan…
- Carson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the calculation, net pension cost is service cost, the interest cost, and actual return on plan assets. What two accounting problems result from the nature of the defined benefit pension plan? Why do these problems arise?A defined benefit plan is one in which: A.) The employer promises specified payments to employees on their retirement. B.)The specific provisions are defined by the Internal Revenue Code. C.) The specific provisions are defined by the Uniform Code of Retirement Plans. D.) The employee can specify the mix of benefits (e.g., health, pension, insurance) that will be received on retirement.Carson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation. Among the components that should be included in the calculation net pension cost are service cost, interest cost, and actual return on plan assets. Required: A. What two accounting problems result from the nature of the defined benefit pension plan? Why do those problems arise? B. How should Carson determine service cost component of the net pension cost? C. How should Carson determine the interest cost component of the net pension cost? D. How should Carson determine the actual return on plan assets component of the net pension cost?
- In a defined-benefit plan, a formula is used that Select one: a. requires that the benefit of gain or the risk of loss from the assets contributed to the pension plan be borne by the employee. b. requires that pension expense and the cash funding amount be the same. c. defines the contribution the employer is to make; no promise is made concerning the ultimate benefits to be paid out to the employees. d. defines the benefits that the employee will receive at the time of retirement.In a defined contribution plan, a formula is used that: Ensures that pension expense and the cash funding will be different Requires an employer to contribute a certain sum each period based on the formula Defines the benefits that the employee will receive at the time of retirement Ensures that the employer is at risk to make sure funds are available at retirementThe Employee Retirement Income Security Act (ERISA) requires that companies fund defined-benefit plans, but no such requirement exists for other postretirement benefits such as health insurance. Evaluate whether there should be a requirement that other postretirement benefits be funded.
- Explain how distributions from a qualified pension plan, which are made in the form of annuity payments, are reported by an employee under the following circumstances: a. No employee contributions are made to the plan. b. The pension plan provides for matching employee contributions. a. Explain how distributions from a qualified pension plan, which are made in the form of annuity payments, are reported by an employee when no employee contributions are made to the plan. O A. The distributions are only taxable to the employee once the taxpayer is retired. B. The distributions are only taxable to the employee once the taxpayer reached 65 of age. C. The distributions are fully taxable to the employee when the payment is received. D. The distributions are not taxable to the employee when the payment is received. b. Explain how distributions from a qualified pension plan, which are made in the form of annuity payments, are reported by an employee when the pension plan provides for matching…In determining the present value of the prospective benefits (often referred to as the defined benefit obligation), the following are considered by the actuary: retirement and mortality rate. interest rates. benefit provisions of the plan. all of these factors. In accounting for a defined-benefit pension plan an appropriate funding pattern must be established to ensure that enough monies will be available at retirement to meet the benefits promised. the employer's responsibility is simply to make a contribution each year based on the formula established in the plan. the expense recognized each period is equal to the cash contribution. the liability is determined based upon known variables that reflect future salary levels promised to employees. Alternative methods exist for the measurement of the pension obligation (liability). Which measure requires the use of future salaries in its computation? Vested benefit obligation Accumulated benefit obligation Defined benefit…Describe three criteria of the 13 minimum standards on which plan status is determined to qualify retirement plans for preferential tax treatment. Are employees more likely to favor defined contribution plans over defined benefit plans? What about employers? Explain your answer. Explain why mobile employees might prefer cash balance plans over defined benefit plans.