Insured Benefits :
An enterprise may pay insurance premiums to fund a postemployment benefit plan. The enterprise should treat such a plan as a An enterprise may pay insurance premiums to fund a postemployment benefit plan. The enterprise should treat such a plan as a
(a) pay the employee benefits directly when they fall due; or
(b) pay further amounts if the insurer does not pay all future employee benefits relating to employee service in the current and prior periods.
If the enterprise retains such an obligation, the enterprise should treat the plan as a defined benefit plan.
The benefits insured by an insurance contract need not have a direct or automatic relationship with the enterprise’s obligation for employee benefits. Post-employment benefit plans involving insurance contracts are subject to the same distinction between accounting and funding as other funded plans.
42. Where an enterprise funds a post-employment benefit obligation by contributing to an insurance policy under which the enterprise (either directly, indirectly through the plan, through the mechanism for setting future premiums or through a related party relationship with the insurer) retains an obligation, the payment of the premiums does not amount to a defined contribution arrangement. It follows that the enterprise:
(a) accounts for a qualifying insurance policy as a plan asset (see paragraph 7); and
(b) recognises other insurance policies as reimbursement rights (if the policies satisfy the criteria in paragraph 103).
43. Where an insurance policy is in the name of a specified plan participant or a group of plan participants and the enterprise does not have any obligation to cover any loss on the policy, the enterprise has no obligation to pay benefits to the employees and the insurer has sole responsibility for paying the benefits. The payment of fixed premiums under such contracts is, in substance, the settlement of the employee benefit obligation, rather than an investment to meet the obligation. Consequently, the enterprise no longer has an asset or a liability. Therefore, an enterprise treats such payments as contributions to a defined contribution plan.