Postemployment Benefits (benefits after employment) by ValixPeraltaValix

4 Kinds of Employee Benefits

1. Postemployment Benefits
2. Short-Term employee benefits
3. Other Long Term Employee benefits
4. Termination Benefits

Definition of Terms

Contributory Plan – employee and employer make contributions

Non- Contributory Plan – employer shoulders all the retirement benefit cost

Funded Plan – entity paid some of funding agency, trustee, bank or insurance for
retirement benefits

Non-Funded – entity is responsible for retirement benefits

Defined Contribution Plan – entity pays fixed contributions into a separate entity,
contribution is definite but the benefit is indefinite (ex. SSS)

Defined Benefit Plan – an entity’s obligation to provide the agreed benefits to

employees, benefit is definite but the contribution is indefinite (RA 7641)

Insured Benefits – entity may pay insurance premium

Components of Defined Benefit Cost

PAS 19 par. 120

1. Service Cost (P&L) – part of employee benefit expense

- Current service cost
- Past service cost
- Any Gain or Loss on settlement
2. Net Interest ( P&L) - part of employee benefit expense
- Interest Expense on DBO
- Interest Income on Plan Assets
- Interest Expense on effect of asset ceiling
3. Remeasurements (OCI)
- Re-measurement of Plan Asset
- Re-measurement of PBO
- Re-measurement of the effect of asset ceiling
Formulas and Why’s?

Annual Pension Payment = future salary x future value of 1 = P

P x given % x years worked

PBO – Dec. 31 = annual pension payment x PV of an ordinary annuity of 1 = P

P x PV of 1

Estimated Pension Liability – Salary x given % retirement benefit

Employee benefit expense (EBE) = depende sa given add (expense) less (income)

= Current/Past Service Cost + Interest Expense – Interest Income

>>> Interest Income = discount rate x fair value of plan asset

>>> Interest Expense = discount rate x projected benefit plan

Re-measurement Gain (RG) = Actual Return on Plan Asset + Interest Income

Gain = ARPA > Int. Income

Loss = Int. Income > ARPA

Define Benefit Cost = EBE – RG