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Basic Question 1 of 24
In a defined benefit plan who normally makes the contributions to the plan?
B. Employee.
C. Employer.
D. Both employee and employer.
A. Independent third party.
B. Employee.
C. Employer.
D. Both employee and employer.
User Contributed Comments 4
| User | Comment |
|---|---|
| PHawk | That's funny. Maybe CFA could explain the deductions from my paycheque for my DBP. Mine is 50/50 employer/employee funded. When the unfunded pension liability was increased, so did my monthly contributions off my paycheque. |
| farhan92 | might not be a DB plan buddy... |
| Pllam3 | The answer is not correct technically. In U.S., employees contributions to DB plans are not tax deductible (only employer contribution are deductible) so this explains why most plans in U.S. (Not all plans) do not have employees contributions (this is not the case for U.S. defined contribution plans where employees contributions are tax deductible). However, in Canada for example, rules are differents and employees contributions to DB plans are tax deductible so most DB plans have employees contributions. |
| ange | Therefore employers "normally" make contribution to DBP. |
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Learning Outcome Statements
explain and calculate measures of a defined benefit pension obligation (i.e., present value of the defined benefit obligation and projected benefit obligation) and net pension liability (or asset);
describe the components of a company's defined benefit pension costs;
explain and calculate the effect of a defined benefit plan's assumptions on the defined benefit obligation and periodic pension cost;
CFA® 2025 Level II Curriculum, Volume 2, Module 11.