What are Post-Employment Benefits?
In the golden years of retirement, when the daily grind is a chapter of the past, post-employment benefits become the cherry on top of the pension cake. Post-employment benefits are perks provided by employers to their loyal troupe of former employees, predominantly aiming to sweeten their retirement life.
Financial Standards Governing Post-Employment Benefits
Imagine explaining to your retired grandparents that their health benefits are covered, not by magic, but by byzantine standards like the Statement of Financial Accounting Standards 106 in the US, which mandates that these benefits be recognized on an accruals basis. Essentially, this means the benefits are recorded when earned, not when paid. This accruals affair means businesses get to show their generous spirit without immediately parting with cash.
On the east side of the Atlantic, after some head-scratching debates, the UK’s Urgent Issues Task Force waved its regulatory wand in 1992, declaring that these financial perks should also grace the financial statements for periods ending after 23 December 1994. Meanwhile, for companies trading stocks like homemade jam at a farmer’s market, the International Accounting Standard 19 has been the sheriff in town since 1 January 2005, ensuring listed companies keep their books on post-employment benefits straight.
The Accounting Tango: Defined-Contribution vs. Defined-Benefit
Strap on your dancing shoes because understanding the difference between a defined-contribution pension scheme and a defined-benefit pension scheme is like mastering the tango. In the former, the contributions are defined but the retirement benefits might swing like mood swings; not so with the latter, where benefits are defined and the employer bears the risk of ensuring the pension pot is adequately stocked.
Further Reading
- Accrued Benefits : This term refers to the benefits accumulated over time and entailed by employees.
- Actuarial Assumptions : Speculations used by actuaries to estimate the employer’s liability with respect to post-employment benefits.
- Actuarial Gains and Losses : The delightful surprises or inevitable disappointments resulting from differences between actuarial expectations and actual experiences.
- Vested Benefit : Promise kept — benefits to which an employee is entitled, even if they decide to tango away from the company before retirement.
Suggested Reading
- “Secure Your Future: The Ultimate Guide to Understanding Employee Benefits” - A comprehensive tour through the labyrinth of employee benefits and retirement plans.
- “Ledgers and Lifelines: Accounting for a Greying Workforce” - An analytical deep-dive into the numerical world of actuarial assumptions and post-employment benefits.
Good luck navigating the often exhilarating, occasionally exhausting world of post-employment benefits. And remember, in the world of retiree perks, the more you know, the sweeter the retirement cherry tastes.
