In: Categories » Legal and finance » Wealth building » Pension Plan Income
|
Most corporations establish pension plans for employees. Older corporations maintain defined-benefit plans, meaning that the company funds the plans with cash that the plan invests in stocks and other assets. Theoretically, the plan’s assets should approximate its future obligations, that is, the money it will be required to pay out to its retired employees. The defined-benefit’s pension plan’s assets depend, however, on the returns it receives from investing the assets. The assets total will not necessarily match the plan’s liabilities at any given time. If assets exceed liabilities, the plan is said to be over-funded. It’s under-funded if its assets fall short of liabilities. If the plan is over-funded, the company can count the plan’s annual returns (income less costs) on its income statement, thereby increasing reported income. These pension plan credits can be substantial. For instance IBM added $1.3 billion to its reported income in 2000. The SEC doesn't require firms to show pension plan credits as separate line items on their income statements, so they are frequently buried in other income. The SEC does require companies to detail pension plan benefits in the footnotes to their annual reports, so you can find them by searching (Ctrl-F on a PC; Cmd-F on a Mac) for “pension” or “retirement.” There’s an easier way, however. The pension plan’s contribution to reported income is an accounting entry; it’s not real money, and no cash moves anywhere. That brings us back to operating cash flow. IBM’s reported net income increased from $7.7 billion in 1999 to $8.1 billion in 2000, but its operating cash flow dropped from $10.1 billion to $9.8 billion in the same period. The divergence between reported net income and operating cash flow signaled earnings quality issues. By the way, newer companies offer 401k type defined-contribution plans instead of defined-benefit plans. The sponsoring company’s contributions to defined-contribution plans are deducted from its profits each year, and there is no ongoing interaction as with defined benefit plans.
|
legal disclaimer
1) Our website is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringements, please read the Terms of service and contact us to investigate the problem.
2) The E-articles directory team is not responsible for inaccuracies, falsehoods, or any other types of misinformation this tutorial may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. Please read the Terms of service
Useful tools and features
If you like this article (tutorial), please link to it from your web page using the information above. Linking to this page, this is the only way to help us improve our service, the same time providing your visitors with a way to improve their online experience.
related articles
The most frequently employed interest rate policy tools used by theFed are: open market operations: The Fed can buy or sell Treasury securities, thereby changing funds available in the economy. For example, when Treasury securities are purchased by the Fed, funds are added to the market. changing the discount rate: The Fed can change the rate at which banks can borrow from the Fed's discount window. This is also the rate at which banks borrow from each other. For example, increasing the disc...
2. The Grand Slam Formula to Double your Income and Long Term Success
The Grand Slam Formula in the Focal Point Process is made up of four parts: simplification, leveraging, acceleration, and multiplication. The Grand Slam Formula is another key to doubling your income and doubling your time off. Simplify The first letter in Slam stands for simplify. To get better control of your time, to double your income and dramatically increase the quality of your personal life, you must learn to simplify everything you do. You must be continually reducing and eliminating activ...
3. Why do you have to avoid credit repair services
You’ve probably seen ads for credit repair services and may have received their fliers in the mail. As you look for legitimate credit counseling help, you may come across their listings in the phone book. Credit repair services push an almost magical solution: “We’ll wipe away your bad credit history and let you start over with a clean slate. We’ll give you a new identity and let you step away from your old one. We’ll remove bankruptcies, judgments, and bad loans from your credit fil...
4. What is a Payment Check
A check (or cheque in Britain) is a written order for a bank to pay money. The term check seems to have evolved from orders for payment called Exchequer orders that were drawn on the Exchequer, the name for the British treasury. The British Exchequer got its name from the checkered cloth that covered the tables in the rooms where cash payments were counted, or checked. The cloth was either black lined with white, or green with redlined squares. Government officials, pensioners, or whoever had a claim...
If you stick with your spending plan and keep applying the money you save to reducing your debt, there will come a time when you have no debt. The emotional burden that’s been weighing you down will be lifted. When you have no debt or low levels of debt, you can really start making your money work for you instead of against you. Instead of working to reduce your debt, you’ll be working to build your net worth. Some of these steps are for the future, but some can be part of your money plan even if you&r...
6. Seven Ways to Higher Productivity
The starting point of higher productivity is clear goals. For a goal to be effective in guiding behavior, it must be specific and measurable. It must be believable and achievable. It must be written out and time bounded. The greater clarity you have with regard to your goals, the more you will get done and the faster you will accomplish what you do. The second key to high productivity is clear, written plans of action. Every minute you spend in planning will save you as many as ten minutes in execution. Make a list o...
7. Six Steps to Doubling Your Income and Doubling Your Time Off
To double your time off, you need the power of decisiveness more than any other single quality or attribute. Your ability to decide to take time off and then to stick to your decision is the key to doubling your time off and spending more time in your personal relationships. Many people are convinced that they have so much to do that they have no real choice about whether they can take time off. They often feel that they have to sacrifice their personal lives for their work. But this is seldom true. It would not be an exagge...