Understanding Defined Benefit Plans

Very Easy Employee Compensation Post-employment Benefits

In the context of employee benefits, companies often provide post-employment benefits to their employees as part of their overall compensation strategy. These benefits may include pensions or other retirement plans. Understanding how these benefits impact the financial statements is crucial for proper financial reporting.

Which of the following is a characteristic of defined benefit plans, a common type of post-employment benefit?

The employer makes fixed contributions regardless of future performance.

The final benefit amount depends on the employee's earnings history and tenure.

Employees bear the investment risk associated with the fund.

Hint

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