Pensions Flashcards
A pension plan that defines an amount of pension bnefit to be provided at retirement, usually as a function of one or more factors such as your age, years of service, or compensation
Defined benefit plan
A pension plan that provides an individual accountfor each participant and provides benefits that are based on amounts contributed–benefits at retirement will equal whatever benefits the contributions provide
Defined contribution plan
The amount that the employer contributes to an independent trustee for hte pension plan
Fundded pension obligation–should not affect amount to be reported as pension expense
The actuarial present value of benefits (vested or not) attributed to employee service rendered before a specified date and based on employee service and compensation before that date
Accumulated benefit obligation
The actuarial present value as of a date for all benefits attributed to by the pension benefit formula to employee service rendered before htat date–the amount determiend under the years-of-service method
Projected benefit obligation
An approach to estimating pension obligation under the defined-benefit method in which an equal portion of hte total estimated benefit is attributed to each year of service–the actuarial present value is derived after the benefits are attributed ot he periods
Benefit-years-of-service approach–if the benefit forma is pay-related and salareis are expected to increase, the projected benefit obligation (which uses this method) will be greater than the accumulated benefit obligation
The difference between the projected benefit obligation ahd the fair value o the plan assets at hte measurement date
Funded status–must be reported in the balance sheet
This is recorded on the balance sheet when a plan is overfunded
noncurrent asset
This is recorded on the balance sheet when the plan is underfunded
Current or noncurrent liability, or both
Assets–usually stocks, bonds, and other investments00that have been segretaed and restricted, usually in a trust, to provide for pension benefits–includes amounts contributed by employers, employees and earned from investing the contributions, less benefits paid
Plan assets
The actuarial present value of benefits attributed by the pension benefit formula to employee service during the current period–future salary levels must be taken into consideration
Service cost
The increase in the amount of the projected benefit obligation due to the passage of time–an element of pension expense (increases it)–must be explicit
Interest on the projected benefit obligation–also referred to as the settlement rate (rate the plan’s obligation could be settled)
An element of pensioin expense, that usally decreases it, that is the difference in the fair value of plan assets at teh beginnign and end of the period adjusted for contributions made to the plan and benefit payments made by the plan
Actual return on plan assets
An element of pension expense that includes retroactive adjustemnts that are granted to recognize servies rendered in prevous periods–increases pension expense
Prior service costs–amortized over the remaining service years using either Expected future years of service method or striaght line over the average remaining service period method
