Explain the difference between a defined benefit plan and a defined contribution plan. Which plan poses more
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Explain the difference between a defined benefit plan and a defined contribution plan. Which plan poses more of a challenge to the accountant, and why?
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Defined Benefit Plan DB and Defined Contribution Plan DC are two common types of employersponsored retirement plans and they differ significantly in how they are structured and the financial challenges they pose to accountants Heres a breakdown of the key differences and the accounting challenges associated with each 1 Defined Benefit Plan DB Structure In a DB plan the employer promises a specific retirement benefit to employees based on a predetermined formula typically considering factors like years of service and final salary The employer bears the investment risk and must ensure there are enough funds to pay the promised benefits Contributions Contributions are made by the employer and sometimes employees to a pooled fund managed by the employer or a trustee Accounting Challenge The primary challenge ...View the full answer
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