# ASC 715-70-05: Compensation—Retirement Benefits — Defined Contribution Plans — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/715/70/#05-overview-and-background)

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## ASC 715-70-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/715/70/#05-overview-and-background)

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##### [715-70-05-1](https://asc.understandingaccounting.org/asc/715/70/#715-70-05-1)

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This Subtopic provides guidance on the accounting and reporting of [defined contribution plans](https://asc.understandingaccounting.org/glossary/d/#defined-contribution-plan "A plan that provides an individual account for each participant and provides benefits that are based on all of the following: amounts contributed to the participant's account by the employer or employee; investment experience; and any forfeitures allocated to the account, less any administrative expenses charged to the plan. Defined contribution health and welfare plans—Defined contribution health and welfare plans maintain an individual account for each plan participant. They have terms that specify the means of determining the contributions to participants' accounts, rather than the amount of benefits the participants are to receive. The benefits a plan participant will receive are limited to the amount contributed to the participant's account, investment experience, expenses, and any forfeitures allocated to the participant's account. These plans also include flexible spending arrangements. Defined contribution postretirement plan—A plan that provides postretirement benefits in return for services rendered, provides an individual account for each plan participant, and specifies how contributions to the individual's account are to be determined rather than specifies the amount of benefits the individual is to receive. Under a defined contribution postretirement plan, the benefits a plan participant will receive depend solely on the amount contributed to the plan participant's account, the returns earned on investments of those contributions, and the forfeitures of other plan participants' benefits that may be allocated to that plan participant's account.").

##### [715-70-05-2](https://asc.understandingaccounting.org/asc/715/70/#715-70-05-2)

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An employer's present obligation under the terms of a plan is fully satisfied when the contribution for the period is made, provided that costs (defined contributions) are not being deferred and recognized in periods after the related service period of the individual to whose account the contributions are to be made.

##### [715-70-05-3](https://asc.understandingaccounting.org/asc/715/70/#715-70-05-3)

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In a postretirement health plan, an employer may establish individual postretirement health care accounts for each employee, each year contributing a specified amount to each active employee's account. The balance in each employee's account may be used by that employee after the employee's retirement to purchase health care insurance or for other health care benefits. Rather than providing for defined health care benefits, the employer is providing a defined amount of money that may be used by retirees toward the payment of their health care costs.