What are post-employment benefits?

Pensions and other post-employment benefits are employee benefits other than termination benefits and short-term employee benefits that are payable after the completion of employment, such as pensions, post-employment life insurance and post-employment medical care benefits.  Post-employment benefit plans, which are formal or informal arrangements under which an entity provides post-employment benefits for one or more employees, are classified as either a defined contribution plan or a defined benefit plan.

A defined contribution plan is a post-employment benefit plan whereby an employer pays fixed contributions into a fund in the form of a separate entity for the benefit of an employee but has no obligation to make further payments if the fund does not have sufficient assets to pay all of the employees’ entitlements to post-employment benefits.  The plan promises a specified monthly benefit at retirement of the employee based solely on the amount contributed to the participant’s account.  Contributions to a defined contribution plan are accounted for on an accrual basis.

If a post-retirement benefit plan is not a defined contribution plan, it is a defined benefit plan.  A defined benefit plan is a post-employment benefit plan that creates an obligation of the employer to the company’s employees that is limited to the amount that the employer agrees to contribute to the plan.  The amount of the benefits actually received by the beneficiaries is based on the amount of contributions paid into the plan and the investment returns arising from the contributions.

Post-Employment Benefits – US GAAP vs. IFRS
	US GAAP	IFRS
Defined Contribution	The concept, characteristics and accounting are similar.
Defined Benefit	PV of obligation −  FV of plan assets	Present value of the obligation +/−  Unrecognized actuarial gains/losses −     Unrecognized prior service costs −     Fair value of plan assets

A plan asset is an asset in post-retirement benefit plan that serves as an investment vehicle to generate income to fund the plan for the benefit of the participating employees.  To qualify as plan assets, they need to meet specific criteria.  Plan assets include insurance policies issued to the plan by the sponsor or a related party of the sponsor if the policies are transferable and meet certain other criteria.  Assets that meet the definition of plan assets and the related liabilities are presented on a net basis in the balance sheet.