...This article when you read the title it makes it seem like there is a real problem with people’s pension, but that’s not the case. The title for the article is very misleading. According to the article State pension programs were funded up to 78%. Public pension is not in a state of turmoil. It is actually doing really well compared to some other publicly funded programs. Issues that had recently arose in places like New Jersey or Illinois, these places were giving the pension program a bad name for a while because their state was having an issue with public pensions. But truthfully the majority of programs like the pension program are no were near being in trouble. As our country is going through a recession, it takes a huge toll on our financial affairs for our state and our country. But the good thing is that publicly funded pension programs have many factors that help to aid in recovery if they need it. A few examples of things that put pension programs back in play: A pension that is underfunded is a huge problem and maybe a sign of a deeper problem. But about 78% of state pension programs are fully funded. Most experts say that time works in the favor of pension programs. They say this because the time and compounding interest will fix the losses that may occur. Public pension programs were greatly affected by the recession, but they have undergone a long recovery over the past few years. Researchers say that we are on the rise with healthy funding levels and it’s going...
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...CHAPTER 20 Accounting for Pensions and Postretirement Benefits ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Questions Brief Exercises Exercises 16 Problems Concepts for Analysis 1, 2, 3, 4, 5, 7 1, 2, 7, 8, 9 1, 2, 3, 4, 5, 6, 9 4, 5 Basic definitions and 1, 2, 3, 4, 5, concepts related to pension 6, 7, 8, 9, 13, plans. 14, 24 Worksheet preparation. Income statement recognition, computation of pension expense. Balance sheet recognition, computation of pension expense. Minimum liability computation. Corridor calculation. Reconciliation schedule. Prior service cost. 10, 11, 12, 14, 17, 18 3 1, 4 2. 3. 3, 4, 7, 10, 15 1, 2, 3, 6, 12, 13, 14, 15, 16, 17, 20, 21 4. 16, 20, 21, 22, 23 20, 22 2 3, 9, 11, 13, 1, 2, 3, 4, 5, 2, 5, 7 14, 15, 17, 6, 7, 8, 9 18, 19 11, 12, 13, 14, 16, 17, 18, 19 8, 14, 20, 21 3, 4, 5, 6, 7, 8 2, 3, 5, 6, 7, 8, 9 2, 4, 5 5. 8, 9, 10 6. 7. 8. 19 25 13, 14, 21, 23 7 6 5, 8, 9, 10 3, 4, 5, 6 3, 9, 10, 14, 1, 2, 3, 15, 19 6, 8, 9 1, 2, 3, 5, 9, 11, 12, 13, 14, 15, 18, 19, 21 1, 2, 3, 4, 5, 6, 7, 8, 9 1, 4 9. 10. Unrecognized net gain or loss. Disclosure issues. 15 25 26 27, 28, 29, 30 7 8, 9, 14, 15, 1, 2, 3, 5, 19, 20, 21 6, 7, 8, 9 9, 12, 13 4, 5, 6 3, 4 *11. Special Issues. *12. Postretirement benefits. 11, 12 22, 23, 24, 25 10 *This material is dealt with in an Appendix to the chapter. 20-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives...
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...The Mammoth Has Arrived: Pension Plans and the darkness that lies within The mammoth has arrived. In the last decade pension obligations have become a serious problem that many organizations are struggling with. The mammoth I speak of is the gigantic pension obligations that are billions of dollars underfunded. The wake of a new era has arisen and organizations are faced with the after effects of years of erroneous expectations on returns on plan assets. The problem has become so explicit that organizations are now overwhelmed and are scrambling to rectify the threats it poses. In this paper I will be using the terms “organization” and “firm” interchangeably. This topic is at the forefront of debate and concern for fortune 500 firms. In consideration of the magnitude and reality of the issues I felt compelled to take a deeper look into the topic. Moreover, I will use this opportunity to illustrate the complexity and seriousness of the issue. The task I am about to dive into will require a moderate overview of pension accounting. That is, I will dissect pension accounting from its roots and try to exemplify a story that has a clear beginning, but lacks any real practical ending. As such, in this paper I will cover the following areas in detail to demonstrate the perplexity that aluminates when this is topic is fetched from the dark holes of the financial statements and put into a context that is, too many, preposterous. This paper...
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...Crisis in Pension Systems. Many countries are experiencing the pension crisis which means that they don’t have enough money to pay future pensions for old people. This essay analyzing two possible solutions which can resolve pensions system problem. There are number of possible reasons of the pensions system’s problem. Firstly, earlier there can be noticed low birth rates in plenty of countries. As a result in present time the number of people of working age reduced which resulted into low tax revenues. In addition, it can be seen that people’s life expectancy increased and therefore there is higher proportion of elderly people comparing with a total population which can lead to the increased strain on pension funds. Another reason for poor performs of pension funds can be international financial crisis which has significantly resulted into uncertainty in stock market and it has led to the weakness of financial institution. One solution, which is common, is to increase retirement age of people. Public sector workers and people receiving state pensions must work longer. In order to receive their pension they should reach the statutory retirement age. For example, many European countries, including the UK and France, have increased retirement ages. Due to the fact that this solution delays the pension funding, it gives governments more time to adjust economic policies and hope the economy will be stronger in the future. As this solution produces considerable saving it can be...
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...GASB 68: An Examination of Affects to the Pension Problem Including Stakeholder Interests Private retirement systems are regulated by the Pension Benefit Corporation (Employee Retirement Income Security Act of 1974); state and local governments are not subject to federal regulation but rather voluntarily comply with GASB standards. (Mattrell, 2013) With all the newsworthy stories involving public pensions, analysts were becoming increasingly critical of GASB regulation over the pension systems. When compared to the requirements of the private retirement systems, it was lacking in transparency. Thus, GASB replaced statement 27 with 68. Government entities with a financial period ending June 30, 2015 will be first to experience the implementation of GASB 68. Many feel that GASB 68 is part of the solution for the ever-increasing public pension crisis in the United States but is reporting for the first time ever in most cases a rather large Net Pension Liability (NPL) on the face of the financials going to solve the problem of underfunded pensions. Employees within the public sector generally enjoy a rather generous pension when compared to others but when they are looked at for their sustainability they fail miserably. Chicago retirement system for teachers, fire fighters and others us underfunded by nearly $24 billion, with residents facing potential 150% increase in property taxes. (Birrer, 2014) Public pension systems in the United States are in need of change if they...
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...Pension Crisis Solutions Crisis in Pension Systems. Many countries are experiencing the pension crisis which means that they don’t have enough money to pay future pensions for old people. This essay analyzing two possible solutions which can resolve pensions system problem. There are number of possible reasons of the pensions system’s problem. Firstly, earlier there can be noticed low birth rates in plenty of countries. As a result in present time the number of people of working age reduced which resulted into low tax revenues. In addition, it can be seen that people’s life expectancy increased and therefore there is higher proportion of elderly people comparing with a total population which can lead to the increased strain on pension funds. Another reason for poor performs of pension funds can be international financial crisis which has significantly resulted into uncertainty in stock market and it has led to the weakness of financial institution. One solution, which is common, is to increase retirement age of people. Public sector workers and people receiving state pensions must work longer. In order to receive their pension they should reach the statutory retirement age. For example, many European countries, including the UK and France, have increased retirement ages. Due to the fact that this solution delays the pension funding, it gives governments more time to adjust economic policies and hope the economy will be stronger in the future. As this solution produces considerable...
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...Retirement and Pension System in Bangladesh M Alimullah Miyan Doctor Vice-Chancellor & Founder IUBAT — International University of Business Agriculture and Technology Dhaka, Bangladesh E-mail: miyan@iubat.edu Abstract The retirement issue mostly relates to those who are in job situation and the retirement age in public service is 57 years. The agriculture sector has no retirement concept as also the case in self-employment. The aspects of retirement in terms of age, old age welfare and social impact have been discussed in this paper. Pension system in Bangladesh is mainly observed in government services. The pension issues are settled according to the rules of the Public Servants (Retirement) Act of 1974. There are four categories of pensions which have been elaborated and analyzed in the paper. There are about 36 million labors working in agriculture sector in the country, who are not covered by pensions. Similarly migrant workers do not receive any pension. There is no provision of pension for private sector workers. They only receive some gratuity at retirement. Government has recently introduced Old Age Allowance Programme which covers small fraction of elderly people in the country who are not covered by pension system. Although limited in coverage, this is a healthy beginning of providing security to vast majority of the elderly people who are not covered by the existing pension system. Family support is the...
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...people go through their entire lives they expect themselves to be able to retire after working for at least thirty years. As a matter of fact, state pensions are enough for a number of people to satisfy their basic needs for lives. Obviously, most people would want to supplement of pension plan because they have to depend on the pensions after they retire. It goes without saying that how important for them to have a stable pension plan when they are still working. A lot of employers also believe that they should set up pension plans when they still work. Pension plans not only bring benefits to the employees but also contribute the complete the corporate system. A couple years ago, some plaintiffs began filing lawsuits against pension plans sponsored by religiously- affiliated non-profit hospitals, challenging their designation as ‘‘church plans’’ under the Employee Retirement Income Security Act of 19741 (ERISA). In order to protect employee’s rights and make sure employer offer pension plans to their employees, the employee retirement income protection act of 1974 (ERISA) was published years ago, and employees can usually avoid unexpected losses in their retirement plans. The federal government set laws to protect employee’s rights with pension...
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...Commentary www.cdhowe.org No. 250 June 2007 ISSN 0824-8001 C.D. Howe Institute The Pension Papers Ill-Defined Benefits: The Uncertain Present and Brighter Future of Employee Pensions in Canada David Laidler and William B. P. Robson In this issue... Attempts to shore up the classic single-employer, defined-benefit pension plan are the wrong response to Canada’s occupational pension problems. While tax and regulatory changes can help, Canadians need a new approach to retirement income that will pool risks, control costs, and avoid the agency problems that have put many pension promises at risk. The Study in Brief The problems of employer-sponsored defined-benefit (DB) pension plans in Canada raise two issues: the need for short-run measures to limit the damage; and the need for new pension models to prevent their recurring. The DB sector’s immediate preoccupations are the result of changes in the economic environment — in particular, a decline in long-term interest rates — that caused their balance sheets to deteriorate, and of changes in accounting standards to more market-based methods that revealed the underfunded state of these plans in stark form. The immediate policy challenge is to ensure the recovery and/or restructuring of sick plans, and the continued health of sound ones. Extra time and financial scope to work off deficits are good, but current limits on contributions to plans should rise or disappear, while legislation to establish clear title...
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...Lukenbill Dr. Sonja Wilson To: Sonja Wilson From: Calie Lukenbill Date: November 21, 2011 Subject: Pensions As you may know there are two types of pension plans that are most commonly used: a defined contribution plan and a defined benefit plan. “A defined contribution plan sets forth a certain amount that the employer is to contribute to the plan each period (Schroeder, Clark, & Cathey, "Pensions and Other Postretirement Benefits," 2011). “A defined benefit plan specifies the amount of pension benefits to be paid out to plan recipients in the future. Companies that use this plan must make sufficient contributions to the funding agency in order to meet benefit requirements when they come due” (Schroeder, Clark, & Cathey, "Pensions and Other Postretirement Benefits," 2011). The defined contribution plan makes no promises on what the ultimate benefits are to be paid. “The benefits received by the recipients are determined by the return earned on the invested pension funds during the investment period” (Schroeder, Clark, & Cathey, "Pensions and Other Postretirement Benefits," 2011). When you account for this plan the risk for future benefit is the employee and the employer’s only cash outflow is the annual contribution to the pension plan fund. “The pension expense is equal to the amount of promised annual contribution”(Schroeder, Clark, & Cathey, "Pensions and Other Postretirement Benefits," 2011). The financial statements should disclose the plan, what...
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...Changes in Workforce Demographics and the Future of Work and Retirement Dr. Jost Lottes Institute on Aging Portland State University No single trend will play a larger role in shaping the social, economic, and geopolitical order throughout the developed and developing world than global aging A historic transformation approaches— the “inversion” of the age pyramid. •!Populations throughout history have all shown a steep pyramid-shaped age distribution—with more young than old people. •!In the near future, starting with developed countries, the distribution will transform into an inverted pyramid— with more old than young people. Pyramid inversion in the developed world—1950 to 2050. year 1950 median age 28.6 Pyramid inversion in the developed world—1950 to 2050. year 1960 median age 29.6 Pyramid inversion in the developed world—1950 to 2050. year 1970 median age 30.6 Pyramid inversion in the developed world—1950 to 2050. year 1980 median age 31.9 Pyramid inversion in the developed world—1950 to 2050. year 1990 median age 34.4 Pyramid inversion in the developed world—1950 to 2050. year 2000 median age 37.6 Pyramid inversion in the developed world—1950 to 2050. year 2005 median age 39.3 WHERE WE ARE TODAY Pyramid inversion in the developed world—1950 to 2050. year 2010 median age 40.8 Pyramid inversion in the developed world—1950 to 2050. year 2020 ...
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...Unit 6 CASH BENEFITS 6.1. Efficiency and equity in retirement pensions 6.2. Efficiency and equity in unemployment benefits 6.3. Efficiency and equity in poverty relief INTRODUCTION New unit → 1st Economic fundamentals of the Welfare State 2nd Welfare State programs cash benefits in-kind benefits - There is a complex set of cash programs - Quantitative and qualitative differences Some of the most important goals of the WS are channeled through cash benefits - income and consumption smoothing - insurance - poverty reduction - redistribution - social solidarity Main questions - What justifies public pensions? - What are the main schemes? - Is capitalization (funded pensions) a viable alternative? 1. INSURANCE, EFFICIENCY AND EQUITY IN PUBLIC PENSIONS a) Efficiency - Any individual should achieve an efficient level of retirement income → rational insurance ⇒ a risk averse individual will buy future pensions if the net price of insurance is lower than the value given to certainty Public o private pensions? Private markets are efficient if there is perfect competition, perfect information and no other market failures. Conditions (a follow-up): 1.- independent probabilities 2.- known probabilities (less than one) 3.- no adverse selection 4.- no moral hazard Inflation → private markets cannot supply insurance against unanticipated inflation (to guarantee the real value of pensions) : 1.- the probability of future levels of inflation is unknown 2.- inflation is...
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...THE IMPACT OF PENSION SECTOR REFORMS ON THE FINANCIAL VIABILITY OF PENSION PLANS IN KENYA By Akwimbi Ambaka William March 12, 2011 Department of Business Administration, School of Business, University of Nairobi, Kenya Electronic copy available at: http://ssrn.com/abstract=1784297 TABLE OF CONTENTS Declaration List of Tables List of Figures Appendices Abbreviation CHAPTER ONE: INTRODUCTION 1.0. 1.1. 1.2. 1.3. 1.4. 1.5. 1.6. Background of the Study The Conceptual Basis of Social Security Schemes The Kenyan Contextual Basis of Social Security Problem Statement Research Questions and Objectives Research Hypotheses Importance of the study 1 3 10 19 22 22 23 CHAPTER TWO: LITERATURE REVIEW 2.0. Introduction 2.1. Review of Theoretical Literature on Financial Viability of Pension Schemes 2.2. Review of Empirical Literature of Studies on the Solvency of Pension Schemes 2.3. Models for Evaluating the Financial Viability of Pension Schemes 2.4. A Summary of the Knowledge and Research Gaps 25 25 46 60 68 REFERENCES APPENDICES i Electronic copy available at: http://ssrn.com/abstract=1784297 GLOSSARY CAC CALPERS CAPSA CBS C-D CEO CGE CSR DB DC E.T.I EME ERISA FMA GASB GDP GSP INPFRS INSS IPD IRA IRBS KNAO KNBS LUPFUND NSE NSSF NYSCRF OECD OSFI PBGC PLC PPF PPR PROST PRPOPS PSPS PSSS RBA SAM SIPO SOX SSNIT SSS Commonwealth Authorities and Companies Act CEO California Public Employees Retirement System The Canadian Association of Pension Supervisory Authorities Central Bureau...
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...Will Greece survive the debt crisis once again? Problem Description Greece was on the verge of bankruptcy in 2010 due to the understatement of their deficit figure for years. They managed to survive this financial crisis with international bailout of 240 billion euros. Although bailouts did manage to provide some time to Greece to improve their financial position, but it came at huge expense. In order to improve the economy, it became necessary for Greece to reduce government spending and increase taxes. Consequences The international bailouts managed to delay Greece economic problem for few years but could not get rid of it completely. Moreover, the unemployment rate in Greece rose to above 25 percent during that time period. The bailouts money that supposed to improve Greece financial position was actually used to pay off debt. As a result, Greece economic situation never recovered and government still have to pay huge amount of debt to its creditors. Greece failure to reach an agreement with Europe to arrange money to pay off its debt could result in huge financial crisis and political changes in Greece as they may have to leave Eurozone and seek help from other countries. Some people believe that if Greece go bankrupt it would not have major economic impact on the Europe as it is just a small part of the euro economy and it would be better off to cut it loose. While, other argue that financial problem in Greece would have a major impact on the world and Europe specifically...
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...Article Analysis —— Pension and property?1 Written by ZOU Yue, DENG Ziqing, CHEN Mengfei Nowadays, the world is facing with a same question, aging population. As a following question, pension has caught world’s attention. Moreover, it seems that old pension policy cannot afford a comfortable retirement due to the rising house prices and inflation. Compared with pension, the article “pension or property – what’s the best plan for retirement” discussed a new way that some people may rely on for their retirement, which is investment in property. From the article, numbers of people decided to depend on property, buy-to-let properties or sell themselves-use properties, to provide an income for their retirement, rather than pensions as traditional. Because pension schemes with uncertain return would lock away their money until they are retired, and refund them with pool value at final. It is reasonable that pensions may have lower return than investment. We can get this conclusion by using a simple model. Suppose that an individual’s lifetime has two periods, then we denote rA as the annuity rate, rP as the yield rate of property, s1 means how much money the individual saves as pension, i means the amount of money individual invest in property, y1 is the income in period 1, c1 is the consumption in period 1. We have y1-c1= s, where s is equal to i. Therefore the individual will have the return on pension in period 2 which is s(1+r A), or have the return on property in period 2 which...
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