Читать книгу Auditing Employee Benefit Plans - Josie Hammond - Страница 13

These terms relate to how benefits are determined. Under a defined contribution plan, benefits are limited by the contributions to a participant’s accounts. Participant account balances may also be affected by investment experience, expenses, and forfeiture allocations, depending on plan design and funding.

A defined benefit plan does exactly that, defines the benefits; that is, the benefits can be determined by reference to the plan design. Sometimes benefits are determined according to a schedule of what will be reimbursed or paid directly to providers, as in medical plans; or developed based on a formula, including factors such as pay or years of service, as in defined benefit pension plans.

Neither of these plan types is required to be funded, by the nature of their design. However, ERISA requires that pension plans, whether defined benefit or defined contribution, be funded.

Exhibit 1-1 provides a summary of defined contribution and defined benefit plans.