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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Explain how a defined contribution pension plan works.

To determine

Pension: Pension is a cash payment given to the employees at the time of their retirement. The pension benefits are accrued based on years of service, annual compensation and age, and based on the employer’s pension plan. There are mainly to basic types of pension plans:

  • Defined contribution pension plan
  • Defined benefits pension plan

To explain: How a defined contribution pension plan works

Explanation

A defined contribution pension plan works in the following ways:

  • In this plan, both employee and employer contribute a portion of gross salary to the plan.
  • In this plan, the employer (company) invest...

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