FARAP12A-Post Employment Benefits

According to Republic Act No. 7641, the minimum amount of retirement benefits is

equal to one-half month salary for every month of service?

• True

• False

Answer explanation

Minimum amount is ½ month of salary for every year of service with a fraction of at least 6 months being considered as one whole year.

One-half month salary is equivalent to 15 days of compensation.

• True

• False

Answer explanation

22.5 days of compensation

In a defined contribution plan, the amounts to be paid to retirees shall be at least equal to the amount of the pre-determined level of benefits.

• True

• False

Answer explanation

In a DCP, the entity has no obligation to pay further contributions if the fund becomes insufficient.

The actuarial risk and investment risk are both shouldered by the employer entity in a defined benefit plan.

• True

• False

Defined benefit plan is more common than defined contribution plan.

• True

• False

Answer explanation

It is prevalent due to the minimum amount of retirement benefit mandated by law.

In a defined contribution plan, if the amount paid is lower than the required contributions, the employer entity shall recognize a prepaid asset.

• True

• False

Answer explanation

It is an accrued liability.

The total retirement cost in a defined benefit plan is equal to the amount of actual contributions to the plan asset.

• True

• False

Service costs have an increasing effect to the balance of the defined benefit obligation.

• True

• False

The defined benefit obligation shall be based on the future amounts of employees' salaries.

• True

• False

Answer explanation

Future salary is one of the financial assumptions considered in determining the DBO

Actuarial gains have increasing effect to the balance of the defined benefit obligation.

• True

• False

Answer explanation

Actuarial gains means decreases of liabílity