Exam 6: Pensions and Other Employee Future Benefits

A pension plan promises to pay $70,000 at the end of each year for 10 years of the retirement period. Required: Compute the funds required to fund this pension plan at the start of the retirement period assuming: a. discount rate of 12%; or b. discount rate of 9%.

If a company provides a non-contributory pension plan, who makes the contributions?

What is the pension expense for the following plan? "The plan requires the company to contribute $500 for each of its 1,000 employees. The plan hopes to accumulate enough funds so that each retiree receives $20,000 in the future; the company has no obligation to guarantee the investment returns."

Katherina is currently 30 years old and plans to retire later in life. She would like to have an income of $35,000 per year during her retirement, which she anticipates will last for another 25 years. Assume that she receives the retirement income at the end of each of the 25 years. Required: Determine the amount of money Katherina will need to have accumulated by the time she starts her retirement. Assume a discount rate of 5%.

In a recent flood some company records have been partially destroyed and it is your job to help reconstruct the missing data. For one of the company employees, Piper Jones, you have managed to gather some information regarding her pension. She currently earns $65,000 per year and expects to be paid through the company's defined benefits pension plan 10% of her final salary for each year of service. Given the state of the company, salaries are not expected to increase. You know that the pension payments should continue until her death, which actuaries expect to be when she turns 85 years old. You also know that the value of the future annuities at date of retirement should be $85,560 to fulfill this commitment. Piper has just turn 45, however, you do not know her planned retirement age. Required: a. Determine Piper Jones planned retirement age assuming the company uses 5% interest rate for its pension plans. b. Determine the current service cost for Piper Jones' pension for the past year (the year just before she turned 45).

Tener Company sponsors a defined contribution pension plan for its employees. The plan specifies that the company will contribute $2 for every dollar that an employee contributes to the plan. Employees are eligible to contribute up to 7% of their salary to the pension plan. During 2020, employees covered by the pension plan earned salaries totalling $42 million. Employee contributions to the pension totalled $2.1 million. Tener contributed $3 million to the plan during the year. Required: Provide the summary journal entry for Tener's pension plan for 2020.

What is the key distinction between amounts recorded through income as pension expense versus amounts recorded through OCI?

Which best explains a "curtailment'?

Saul is currently 30 years old and he plans to retire early, in 20 years' time. He would like to have an income of $60,000 per year during his retirement, which he anticipates will last for another 40 years. Assume that he receives the retirement income at the end of each of the 40 years. Required: Determine the amount of money he will need to have accumulated by the time he starts his retirement. Assume a discount rate of 5%.