Employee/Retiree Benefits

Question 1

Defined Contribution Plan

Answer 1

• The Simple one
• Employer pays an annual contribution to the plan

Pension Expense
———-Cash

Question 2

Vesting Definition

Answer 2

When employee has met certain conditions and becomes eligible to receive pension benefits at retirement regardless if employee continues to work

Question 3

Employee Benefits effect 2 financial statements

Answer 3

• Income Statement: pension expense

- Balance Sheet: underfunded or overfunded plan(liability or asset)

Question 4

PBO vs PV of Plan assets (asset or liability)

Answer 4

• If PBO is larger then you have a liability

- If FV of plan assets is larger then you have an asset

Question 5

The two required financial statements of a defined contribution retirement plan

Answer 5

• Statement of Net Assets available for benefits

- Statement of Changes in net assets

Question 6

Accumulated benefit obligation.

Answer 6

Present value of all unpaid future retirement benefits as of the balance sheet date based on

• service rendered to that date
• current salary levels

Question 7

Pension Asset or Liability

Answer 7

• If you have liability you add expenses and minus contributions
• If you have an asset you add contributions and minus expenses

Question 8

When you have multiple plans

Answer 8

Do not net separate plans against each other

Question 9

5 Components of Pension Expense

Answer 9

• Service Cost
• Interest Cost: Beginning PBO * Discount Rate
• Expected Return on Plan Assets: Beginning plan assets * expected rate of return
• Amortization of prior service cost
• Amortization of net gain or loss

Question 10

Pension Expense Example Beginning of the year

Answer 10

Net Pension Asset/Liability

———-Cash

Question 11

Pension Expense Example Beginning of the year

Answer 11

Pension Expense

—–Net Pension Asset/Liability

Question 12

Prior Service Cost Amortization

Answer 12

• Total number of years per employee divided total number of employees

Question 13

Corridor Gayness

Answer 13

• Multiply greater of PBO or FV of Plan Asset by 10%
• Find difference between that 10% and unrecognized loss
• Divide by average service life remaining

Question 14

Amount of Corridor to be use? What is the corridor?

Answer 14

Greater of PBO or FV of Plan Assets * 10%

Question 15

Excess of Corridor

Answer 15

Difference between the 10% and unrecognized loss

Question 16

Watchout when beginning PBO Increases

Answer 16

Changes Interest cost

Question 17

Pension Gains & Losses IFRS

Answer 17

Not Recognized under IFRS

Question 18

APBO Additions and Subtractions

Answer 18

APBO - FV Plan Assets
\+ Service Cost
\+ Interest Cost
- Actual Costs
\+ Actual Loss
- Actual Gain
- Funding

Question 19

Adjustment for Accumulated Other Comprehensive Income Tax effect

Answer 19

PBO - FV of plan assets and include tax effect

Question 20

Minimum pension liability when you PBO & FV of plan assets and Pension cost & employer contribution

Answer 20

The answer is the difference between them