Exam 17: Pensions and Other Postretirement Benefits

JL Health Services reported a net loss-AOCI in last year's balance sheet. This year, the company revised its estimate of future salary levels causing its PBO estimate to decline by $24. Also, the $48 million actual return on plan assets was less than the $54 million expected return. As a result:

Pension plans typically require some minimum period of employment before benefits vest. What is the 1974 federal law governing vesting (as well as other aspects of pensions)? What are the vesting rules?

The following data are for Guava Company's retiree health care plan for the current calendar year. - What is the correct entry to record postretirement benefit expense for the current year?

Prior to 1993, postretirement benefits other than pensions generally were accounted for on the:

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the most correct term. -Accumulated other comprehensive income

Conceptually, the service method provides a better matching of costs and benefits in amortizing prior service cost than does the straight-line method.

What are the five components of postretirement benefit expense?

The net pension liability (PBO minus plan assets) is increased by:

The attribution approach required by GAAP for postretirement health care plans is to assign:

A company's total obligation for postretirement benefits is measured by the:

Service cost with regard to pension plans:

In its 2018 annual report to shareholders, JDS Corporation disclosed the following information about its pension plan: (\ in millions) PROJECTED BENEFIT OBLIGATION Beginning balance \ 120.0 \ 102.2 Service cost 4.1 5.5 Interest cost 7.0 6.5 Benefits paid (2.6) (4.4) Actuarial loss Ending balance \ 135.1 \ 121.2 The increase in the underfunded projected benefit obligation was primarily attributable to a reduction in the assumed discount rate. This was combined with the effect of increases in benefits under the terms of the plan in excess of current inflation rates. The net result was reflected as a reduction in accumulated other comprehensive income. -Why did the loss result in a reduction in accumulated other comprehensive income?

The income statement of Starboard Industries includes $12 million for the amortization of a loss resulting from the company's actuary changing an estimate used in calculating the obligation for the pension plan. Does Starboard Industries prepare its financial statements according to U.S. GAAP or IFRS?

Data for 2018 were as follows: PBO, January 1, $240,000 and December 31, $270,000; pension plan assets (fair value) January 1, $180,000, and December 31, $230,000. The projected benefit obligation was underfunded at the end of 2018 by:

A company's defined benefit pension plan had a PBO of $265,000 on January 1, 2018. During 2018, pension benefits paid were $40,000. The discount rate for the plan for this year was 10%. Service cost for 2018 was $80,000. Plan assets (fair value) increased during the year by $45,000. The amount of the PBO at December 31, 2018, was:

What is the theoretical and practical trade-off when measuring the pension liability using the projected benefit obligation compared to the accumulated benefit obligation?

Lasagna Corporation has a defined benefit pension plan. Lasagna received the following information for the current calendar year: Projected benefit obligation Balance, January 1 \ 100,000,000 Service cost 18,000,00 Interest cost 10,000,000 Benefits paid (8,000,000) Balance, December 31 \ 120,000,000 Plan assets Balance, January 1 \ 70,000,000 Actual return on plan assets 7,000,000 Contribution 16,000,000 Benefits paid (8,000,000) Balance, December 31 \ 85,000,000 The expected long-term return on plan assets is 10%. There were no other relevant data for the year. Required: 1) Determine Lasagna Corporation's pension expense for the year. 2) Prepare the journal entries to record the pension expense and funding for the year.

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the most correct term. -Return on plan assets less than the expectation

Oberon Company provides postretirement health care benefits to employees who provide at least 10 years of service and reach the age of 65 while in service. On January 1 of the current year, the following plan-related data were available. On January 1 of the current year, Oberon amended the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $10,000,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $60,000,000. The appropriate interest rate is 10%. Required: Calculate the postretirement benefit expense for the current year.

Blue Company has a plan whereby it pays for health care insurance for all employees after they retire. Red Company has a defined benefit pension plan for its employees. With respect to these plans, which of the following statements is not true?