Comparison of Historical and Current Accounting for Pensions and Life Insurance Benefits

Accounting for Pensions and Other Postretirement Benefits
Student Name
Course Title
Professor Name
Date
Accounting for Pensions and Other Postretirement Benefits
Abstract
The research paper compares and contrasts several post-retirement healthcare and life insurance benefits based on the Financial Accounting Standard Board (FASB) standard of “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” linked with financial accounting and reporting. In addition, the report predicts the future of accounting for benefits depending on the potential changes in businesses and the political environment. Finally, the report’s recommendations are based on the changes to the guidance in improving the reporting of pension and related post-retirement benefits.
Comparison of Historical and Current Accounting for Pensions and Life Insurance Benefits
Employers need to disclose plans and feature them in documents based on the historical post-retirement of healthcare and benefits. In the past, employers needed to disclose the pension as an expense. That is why it is the part of net assets and liabilities, which are not booked in the income; instead, they are booked in the comprehensive income. Usually, these retirement benefits are fixed based on the contracts, and estimation is difficult. However, according to FASB, changes need to be made on the future cost and non-pension benefits to make hard choices (FASB, 1). Therefore, the current emphasis is on health costs for treating pension costs while preparing financial statements. On the other hand, the state and local governments emphasize benefits accrued for past and current employees.
Post-retirement benefit plans are usually designed to meet the after-retirement demands of employees. Employees usually demand pension plans, insurance, and healthcare plans to avoid significant expenses and smoothly meet their ends. Post-retirement benefits have been in demand over the years. However, most benefit plans have changed because of different legal mandates and accounting policy changes. Some post-retirement benefits that do not fall into pensions are treated in other post-retirement benefits (OPBRs). These post-retirement benefits are part of SFAS No. 106, addressed under ASC 715 of FASB. According to the new rule, businesses have to include more benefits for post-retirement rather than cash (FASB, 2). Before the approval of FASB 106, most companies rely on a cash basis and known as a pay-as-you-go basis. It means that the employee does not have to face any expense until they are retired.
According to FASB 715, the post-retirement benefit cost over the working lives is accrued over the working tenure of employees. Therefore, these employees do not require the disclosure of the minimum liability balance sheet. Although OPBRs are linked with pension plans, they have different accounting considerations. Prominent differences as highlighted in Sec 171 are:
* Unlike pensions, OPRBs do not vest; when employees leave the organization, they do not have the right to claim future benefits. That is why defined benefits are covered under minimum vesting, funding standards, and Pension Benefit Guaranty Corporation. In addition, it falls u...