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Pension and Postretirement Plans

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Acquisition of Other Company, Pensions and Other Postretirement Plans

Abstract
Recently, Midsize Manufacturing Company acquired 100% of another company. Along with the acquisition, Midsize Manufacturing Company inherited the former company’s employee pension plans and other postretirement plans. In the following I will discuss the required reporting for defined contributions, defined benefits, and other postretirement benefits. I will also address how the former company’s segments shall be dissolved.
Defined Contribution Plan vs Defined Benefit Plan

First, Midsize Manufacturing Company must determine the type of pension plan that will be offered to the inherited employees. The employees from the former company experienced two differing pension plans. It is in the best interest of Midsize Manufacturing Company to select one plan moving forward. According to Schroeder, Clark, and Cathey (2011), the two most frequently encountered types of pension plans are defined contribution plans and defined benefit plans (p. 456).

On one hand a defined contribution plan applies a set amount to the employee’s retirement per period. Often the employee will contribute a designated amount to the investment and the employer then has a match plan coinciding with the employee’s investment. Examples of defined contribution plans are 401(k) or 403(b). Defined contribution plans tend to be useful for small to midsize companies “since the risk for future benefits is borne by the employee” (p. 457). Also, the potential to budget for necessary funds becomes more streamline and straightforward as a company responds to the current employee activity.

On the other hand, a defined benefit plan applies the payout of benefits at a designated future time. Defined benefit plans are extremely challenging plans to fund with consistency and accuracy. Schroeder, Clark, and

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