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1.3 Defined benefit plan
Publication date: 31 Oct 2023
us Pensions guide
ASC 715-30-20 defines a defined benefit plan.
Excerpt from ASC 715-30-20
Defined benefit plan: A defined benefit plan provides participants with a determinable benefit based on a formula provided for in the plan. …
b. Defined benefit pension plan—A pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service, or compensation. Any pension plan that is not a defined contribution pension plan is, for purposes of Subtopic 715-30, a defined benefit pension plan.
As the definition says that a defined benefit pension plan is any pension plan that is not a defined contribution plan, the first step in evaluating the type of plan is to determine if it is a defined contribution plan (see PEB 1.4). If a plan does not meet the criteria of a defined contribution plan, it is a defined benefit plan by default. An example of a defined benefit plan is one in which participants may receive monthly benefits of $100 for each year of service or annual benefit payments of 1% of the final year's pay for each year of service. Additionally, most “cash balance” plans (see PEB 1.6.2) are also defined benefit plans. PEB 2, PEB 3, and PEB 4 contain further detail on the accounting for defined benefit plans.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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