FAR 6 Pensions

Question 1

Accumulated Benefit Obligations (current)

Answer 1

use current salary

assumption about future compensation levels

Question 2

Projected Benefit Obligation (future)

Answer 2

use future salary

assumption about future compensation levels

Question 3

Service cost

Answer 3

present value of all pension benefits earned by company employees in the current year

Question 4

Interest cost

Answer 4

increase in the projected benefit obligation

Question 5

Prior service cost

Answer 5

The cost of benefits based on past service granted for:

• service prior to the initiation of a pension plan that employees retroactively receive credit for when the plan is implemented
• subsequent plan amendment reflecting new or increased benefits that also is applied to service already provided
• increases PBO
• amortized to pension exp over the future service periods

Question 6

Actuarial gains and losses

Answer 6

adjustments to the projected benefit obligation that arise when the actuary changes sth
- actuarial gains decreases PBO and loss increases PBO

Question 7

Projected Benefit Obligation formula

Answer 7

Beginning PBO
\+ Service cost
\+ Interest cost
\+ Prior service
\+ Actuarial losses
- Actuarial gains
- Benefits paid
Ending PBO

Question 8

Plan assets

Answer 8

set aside to provide pension benefits

reported at FV

Question 9

Actual return on plan assets

Answer 9

Beginning FV of plan assets
\+ Contributions
\+ Actual return on plan assets
- Benefits paid to retirees
Ending FV of plan assets

Question 10

Prior service cost and pension losses - recognition in period incurred

Answer 10

1. Prior service cost
   Other comprehensive income
   Pension benefit asset/liability
2. Deferred tax asset
   Deferred tax asset
   Deferred tax benefit - OCI
3. Amortization of prior service cost
   Deferred tax benefit - OCI
   Deferred tax benefit - Income state
4. Reclassification deferred tax asset from OCI to IS
   Deferred tax benefit - OCI
   Deferred tax benefit - IS

Question 11

Unrecognized pension gains or losses amortization

Answer 11

Amortized over the average remaining service period if:

• at the beginning of the year, the gain or loss exceeds 10% of the greater of:
  a. the beginning of the year PBO
  b. the beginning of the year FV of plan assets.

Question 12

Fund status - under or overfunded

Answer 12

PBO-Assets