According to the Financial Accounting Standards Board, employers fund retirement benefits on a pay-as-you-go basis.

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The Financial Accounting Standards Board requires employers to account for retirement benefits on an accrual basis, which recognizes the cost of benefits earned by employees in the current period. The pay-as-you-go system only covers the benefits paid out to retirees in the current period, without recognizing the cost of benefits earned by current employees.

According to the Financial Accounting Standards Board, Employers Fund Retirement