Chapter 17, Problem 17.3Q

To determine

Pension plan: This is the plan devised by corporations to pay the employees an income after their retirement, in the form of pension.

Types of pension plans:

• Defined contribution pension plans: In such plans, employers contribute fixed amounts annually, to the pension fund.  The benefit amounts are based on size of pension fund available at the time of retirement. There is no commitment on the part of the employers to pay fixed retirement benefits.
• Defined benefit pension plans: In such plans, employers pay annual fixed contributions to employees as retirement benefits. Employers promise to pay fixed retirement benefits, which are computed based on the service period of employee, annual compensation of the employee, and age.

To indicate: The type of pension plan established by Corporation L