When analyzing retirement benefits that may be given by an employer it seems like
pensions are more likely to be given than OPRB’s. “Although the attribution period is
defined in the same way, the effect is different because the benefit formulas for most
pension plans link benefits to years of service and salary levels. The result is that, for
pension plans, the expected retirement date and date of full eligibility are the same. For
many OPRBs, however, the attribution process causes the two dates to be different.”
Pensions have a predetermined amount of years that they will be paid out so the employer
knows about how much this will cost them per employee that receives a pension because it
is based on salary and years of service. This would make pensions plans easier on the
accounting side of things for the company. When comparing this to an OPRB like health
insurance after retirement, there is no predetermined time limit on when the health
insurance would end. If the employee encounters a bigger health problem in the future, it
may cost the employer more than anticipated. On the other hand, it seems like the health
care benefit after retirement would be better for the employee because health care is a big
cost, but it is definitely worse for the company.
References
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate Accounting: Reporting
and analysis. Boston, MA: Cengage Learning
