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1. Discuss how pension plan can significantly impact the perforanceof an organization.
2. Evaluate whether or not moving away from defined benefit plansis a good decision.
3. Discuss how an employer can use participation in a definedcontribution plan as a competitive advantage.

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Patrina Schowalter
Patrina SchowalterLv2
28 Sep 2019

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Please complete the problems below, and submit your answers tothe Week 7 Dropbox. See the Syllabus section “Due Dates forAssignments & Exams” for due date information. Please useproper spelling and grammar in your response.

Please choose one of the following (1, 2, or 3), and respond tothe questions.

For employees available to participate in a pensionplan

Does your employer offer a retirement plan at work? If so,answer the following.

What type of plan is it? Defined benefit or definedcontribution?*

If defined contribution, what type?

401(k)

403(b)

Employee stock ownership plan

Profit-sharing plan

Does your employer “match” your contribution? If so, what is thematch?

What are the benefits to you (the employee) of participating inthis plan?

Are there limits to how much you can contribute to the plan?

Does it have a Roth feature?

What are the benefits to your employer for offering thisplan?

If you are not contributing, why?

* If you do not know the answer to these questions, then askyour HR or payroll department for the answers. Please do notguess.

For employees without a pension plan atwork

If your employer does not offer a retirement plan at work, thenemployees have some options for accumulating retirement savings ontheir own.

Discuss the nonemployer plan retirement saving opportunitiesavailable to an employee.

Are you currently contributing to a nonemployer plan?

If yes, what type?

What is the benefit to you as an employee for saving for yourretirement?

Are there limits to how much you can contribute to the plan?

If you are not contributing, why?

For the self-employed

Are you self-employed? If yes, address the following.

What retirement savings opportunities are available to theself-employed?

Are there limits to how much you can contribute to the plan?

Do you currently contribute to a self-employed plan?

If so, what kind?

What are the tax benefits to a self-employed person for makingcontributions?

If you are not contributing, why?

For the nonworking taxpayer

If you do not have a job and you are not self-employed, thenchoose one of the following.

Please address questions 1, 2, or 3 above based on an interviewyou have conducted with your spouse, and describe a spousalIRA.

If you are unmarried, please address questions 1, 2, or 3 abovebased on an interview with one of your parents.

If neither of the above options is possible for you, pleaseinterview a friend, and address questions 1, 2, or 3 above.

Please build the answer based on the following text from astudying book:

Reporting Pension Contributions and Adjustments The followingare some general year-end reporting guidelines employers shouldfollow when reporting pension contributions and pension adjustments(PAs):
 employee contributions to a registered pension plan (RPP) are taxdeductible; they are reported in box 20 on the T4 slip


 employee and employer contributions to a defined contributionpension plan are part of the PA that is reported in box 52


 PAs are reported on the T4 slip; however, under certainconditions the PA may be reported on the T4A slip


 employee contributions to a Registered Retirement Savings Plan(RRSP) are not reported by payroll; the employee will receive a taxreceipt from their financial institution


 employer contributions to an employee’s RRSP are reported on theT4 slip in box 14 and in the Other Information area using code 40as they are a cash taxable benefit, subject to CPP contributionsand EI premiums

Question:

Your organization currently has a defined contributionpension plan with employees contributing up to 3% with a companymatch. Effective with the first pay of the new year, new employeeswill no longer be enrolled in that plan. Instead, they will beenrolled in the new Group Registered Retirement Savings Plan (RRSP)with the same contribution options. In your ownwords, explain the difference in the T4 information slipreporting for these two groups of employees.

Ballooning Out of Control LLC (“BLOC” or the “Company”) is amanufacturer of hot air balloons. Because of decreased demand forhot air balloons and challenging industry conditions, BLOC’smanagement is exploring ways to reduce the Company’s rapidly risingcompensation and benefit costs. Management has determined it willeither (1) amend the Company’s single-employer defined benefitpension plan by eliminating the future earning of pension benefitsfor its employees (i.e., freeze its pension plan) or (2) reduceheadcount across the Company by 5 percent. Either option willrequire approval by BLOC’s board of directors.

If BLOC decides to freeze its current pension plan, it will notoffer any new pension benefits to its employees through anotherplan. BLOC’s current pension plan is the only retirement benefitarrangement it provides to its employees. The plan’s pensionbenefits are based on years of service and average salary for thelast five years of the employee’s service period, and allemployees, both hourly and salaried, who have attained six monthsof service are participants in the pension plan.

Under the plan freeze, the Company will eliminate the accrual ofadditional pension benefits for future service. However, theCompany will continue to take future salary increases into accountin computing the average salary for the last five years beforeretirement when determining the pension benefits earned for servicebefore the plan freeze. (This type of plan amendment is commonlyreferred to as a “soft freeze.”)

The pension plan freeze will be effective on October 1, thebeginning of BLOC’s next fiscal year, and is expected to beapproved and communicated to employees before BLOC’s September 30year-end.

If BLOC’s management decides instead to reduce costs by reducingheadcount by 5 percent, it anticipates that the board of directorswould approve the reductions and management would communicate itsplans to the affected employees before September 30. Beforechoosing which cost-cutting plan to recommend to the board ofdirectors, management would like to determine how to account foreach alternative.

Required: 1. Determine how to account for each of the followingalternative actions to reduce BLOC’s increasing compensation andbenefit costs:

a. Management decides to amend the pension plan by eliminatingthe accrual of pension benefits for future service while continuingto take future salary increases into account in determining pensionbenefits at retirement (i.e., a soft freeze).

b. Management decides to permanently lay off 5 percent of BLOC’splan eligible workforce while retaining the current pensionplan.

2. What are the differences, if any, between the requirements ofU.S. GAAP and IFRSs in accounting for the two alternative actionsmanagement, is considering?

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