pensions Flashcards
Contributory
Non contributory
Funded
EMployee must contribute
Only company contributes
employer makes cash contributions
Overfunded Plan
Underfunded
Assets exceed liabilities
Liabilities exceed assets
Defined Contribution Plan
Specifies PERIODIC AMOUNT of contributions
Defined Benefit Plan
defines the BENEFITS TO BE PAID at retirement
**ACTUARIAL ASSUMPTIONS
ABO
PBO
uses current and past salary
Uses future (guess) salary
Formula to find actual return on plan assets
Beginning FV \+contributions \+actual returns - benefits paid =ending FV
Formula to find PBO
Beginning PBO \+service cost \+interest cost \+prior service cost \+actuarial losses -actuarial gains -benefits paid = ending PBO
what is net periodic cost SIRAGE
increase in PBO during the period
SIRAGE
S= current service cost I = interest cost (R)= (return on plan assets) A= amortization of prior service cost (G)= (gains) losses E= amortization of existing obligations`
how to find interest cost
beginning PBO
X discount rate
= interest cost
how to find EXPECTED return on plan assets
beginning FV of plan assets
X expected rate of return
= expected return on plan assets
- difference between actual and estimated return is recorded in OCI and amortized into expense
net defined benefit liability (IFRS)
difference between the defined benefit obligation and the FV of plan assets adjusted for pension gain/loss and service cost
how to find amortization of prior service costs
beginning unrecognized prior service cost / average remaining service life
= amortization
how to find amortization of unrecognized gains/losses using the CORRIDOR APPROACH
unrecognized gain/loss greater =excess excess/avg remaining service life = amortization of gain loss
pension settlements
when plan assets grow to a point where they can sell them to purchase an annuity contract to satisfy pension obligations
curtailments
events that reduce expected remaining year of service
termination benefits
employees are paid to terminate their future pension payments
Pension Benefits standalone financial statements include
1) net assets available
2) changes in net assets available
3) accumulated benefits
4) changes in acc benefits
*SOCF not required but may help
APBO
Accumulated Postretirement Benefit Obligation
*PV of the future benefits that have vested as of the measurement date
EPBO
Expected Postretirement Benefit Obligation.
- PV of the future benefits EXPECTED to be paid
Includes:
1) the vested amount (APBO)
2) the expected amount not vested yet
what method is used to calculate PBO
benefit years of service method
