Topic: Postretirement Benefits
Add your ideas about which one makes the most sense and why. Additionally, discuss how this might impact the company.
Peer 1: A pension plan is something that companies give to their employees when they retire who have worked at the company a certain amount of time. This plan is based off the salary this person was making right before they retired. It is a set amount they receive each month from their previous employer.
The benefit I would choose is health insurance. Health insurance is very important to have especially for people who are retirement age. As you get older the more health issues that can pop up. So, it is important to know that your health is covered in case anything happens. Especially because free health insurance or health insurance you buy from the marketplace is said to not be the best. Unfortunately, if you don’t have good health insurance you won’t be able to get the best care.
Peer 2: Employers frequently provide postretirement benefits to employees such as pensions while also offering them other postretirement benefits (OPRB’s) like healthcare insurance benefits. The similarities in accounting between pensions and other postretirement benefits such as healthcare insurance are that they both require the company to adhere to the GAAP requirement that the accrual accounting method be used when managing these transactions and they both have an obligation/liability to the company. The major difference in accounting for pension and healthcare insurance plans is the way service cost is measured. The service cost for a pension plan is measured by multiplying the present value by the discount rate because these rates are usually predetermined and are fairly predictable. The service cost for an OPRB healthcare plan is the portion of the expected postretirement benefit obligation assigned to an employee’s service during a period like an employee’s date of hire to when the date the employee becomes fully eligible to receive the benefits. Also, unpredictable elements such as the current medical-cost trend rate and marital and dependency status during retirement are also considered annually as where pension benefits do not consider these.
A healthcare plan would make the most sense to select because a company doesn’t need to fund it regularly like it would a pension plan. The healthcare plan would be funded as it is used.
It’s that simple.Pay only when you are satisfied.
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