What is Post-Retirement Benefit?
Post-retirement benefits are for people who has served or worked to achieve a lifetime benefit for themselves. This is one form of retirement pension that is paid to the employees in their retirement years. These including things like medical plans and life insurance. These forms of payments are paid by the employers, but the retired employees share them in cost of benefits through co-payments, deductible payments, and employee contribution plans when needed. They are mostly non-cash forms of payment benefits that are made available to employees through things like dental, medical, vision-care, tuition credits and legal services. Apart from regular pension benefits, there are additional benefits that contribute to the expenses of the organization. If the funds are offered by the company, then the expenditures are higher in nature and the cost of these funds can be found in the company’s financial statements. Look for the notes section to find expenditures that will also reveal the size of the obligation is and how well funded the funds are.
Post-retirement benefits includes defined benefit plan, pension plan, life insurance, other post-employment benefits, covered earnings, 419(e) welfare benefit plans, and various other benefits and plans for your retirement. Post-retirement benefits focus on health plans and various health covers.
According to FASB issuance in the 1990 of SFAS 106, only a few companies found it hard to keep this expensive obligation through the accrual-based accounting. This earlier was a “pay-as-you-go” basis for employees. Although SFAS 106 issuance covered all types of post-retirement benefits keeping employee retirement benefits in mind, the major focus was to provide them with healthcare benefits and costs. This affected the balance sheet tally of many companies due to the nature of such healthcare cost benefits. Through studies conducted earlier, SFAS 106 has reduced the basic earnings of at least 74 companies by 92% in average. According to SFAS 158, funded status of a benefit plan should be recognized. Aggregate any overfunded plans to recognize the amount as an asset in the financial statement position. It should recognize as component of various incomes and also recognizing corresponding adjustments through other comprehensive income. According to FASB, SFAS 158 will help in improving the financial reporting that makes it more complete and relevant.