An Internal Revenue Code Rule That Impacts the Design of Pension

question 73

Multiple Choice

An Internal Revenue Code rule that impacts the design of pension plans is that:

• A) employee contributions to the pension fund are not taxable to the employee until pension benefits are actually received.
• B) pension fund earnings are taxable.
• C) employer contributions to the pension fund are not taxable to the employee at the time pension benefits are actually received.
• D) all employer pension expenses are deductible for income tax purposes.

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Definitions:

Accrued Expenses

Expenses that have been incurred but not yet paid, typically recorded at the end of an accounting period.

Prepaid Expenses

Costs paid in advance for goods or services, which are accounted for as assets until the benefits are realized.

Investing Activities

Financial transactions and events related to acquiring or disposing of investments and long-term assets.

Bonds Payable

A long-term liability representing the amount owed by an entity to bondholders, to be repaid at the bond's maturity date.