a Postretirement benefits are benefits the company provides to previous
employees after their retirement (Whalen et al., 2017). These can include
benefits such as health care, vision care, dental, tuition assistance, and legal
assistance (Whalen et al., 2017). Pensions and OPRBs are both based on
liability as both account for probable future costs (Whalen et al., 2017).
The postretirement benefit I focused on this week was healthcare
benefits. It is essential to many people to have healthcare benefits. Based on
personal experiences, without healthcare benefits, one major health event can
be financially devastating. I would be driven to remain with a company that
offered postretirement health benefits due to the rising instances of the need
for medical care as people age. One thing to consider when deciding whether
to offer pensions or OPRBs is that accounting for OPRBs can be more
complicated than pensions, as pensions generally provide a set amount of
money paid each month (Whalen et al., 2017). With healthcare benefits, rates
can change depending on factors such as the seriousness and length of illness
and marital and dependency status (Whalen et al., 2017). With healthcare
benefits, the beneficiary of pensions is generally just the retired employee,
whereas OPRBs often include the retired employee, their spouse, and their
dependents (Whalen et al., 2017). One thing to consider is that OPRBs often
do not have explicit legal contracts, which would make it possible for
companies to back out of the benefits. However, court cases recently have
been ruling against companies backing out of these benefits (Whalen et al.,
2017).
When it comes to deciding between a pension or an OPRB, a company
could go either way. On one hand, a company may like to predictability of
knowing exactly what to account for with pensions, where they give a set
amount of money. However, they may also like the idea of potentially being
able to back out (though courts have been making that more difficult). They
may also like the potential that they may not have to pay out much in the other
benefits. Personally, I'm not too fond of surprises, so I would choose a pension
plan so it could be accounted for more accurately.
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References
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate Accounting:
Reporting and Analysis (2nd ed.). Cengage Learning.
