CERTYNEX IFRS ACADEMY

Lunor SA pays each year 5% of salaries into a separate fund, which pays each retiree a pension equal to 1.5% of the final salary per year of service. The rules provide that Lunor tops up the fund if its assets are not enough to pay the promised pensions (case facts). Which classification is correct?

Defined contribution plan, because Lunor pays 5% of salaries each year into a fund that is separate from the employer.

Defined contribution plan, because the assets are held in a separate fund, which itself pays the pensions to retirees.

Defined benefit plan: Lunor keeps the commitment to top up the fund.

Defined contribution plan as long as the fund is in surplus; the classification changes if a deficit arises in the fund.