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Basic Question 2 of 5
Company incentives for using a defined contribution pension plan instead of a defined benefit plan include:
II. Tax exemption for pension investment earnings.
III. Potential for earnings management.
IV. Paternalistic attitude to employees, since employer maintains all obligation risks.
I. Employer has no future liability beyond contributions.
II. Tax exemption for pension investment earnings.
III. Potential for earnings management.
IV. Paternalistic attitude to employees, since employer maintains all obligation risks.
User Contributed Comments 3
| User | Comment |
|---|---|
| davidt876 | II - applies to both defined contribution and benefit, so it's not an incentive to use one over the othe |
| UcheSam | @davidt876 II only applies to Defined Benefit Plant as Defined Contribution Plan does not have pension investment earnings. Pension contributions are expense in the period services was earned, although tax deductible. |
| nik24 | Why not III ? Since, it can be used as a tool manage net income |
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Learning Outcome Statements
describe the types of post-employment benefit plans and implications for financial reports;
CFA® 2025 Level II Curriculum, Volume 2, Module 11.