Acct 4120 Chapter 17 Spiceland 5th edition

Acct 4120 Chapter 17 Spiceland 5th edition - Acct4120...

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Acct 4120 Chapter 17 Pensions and Other  Postretirement Benefits
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Pension Plan Participants Chapter 17 page 2
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Pension Plans Chapter 17 page 3 Defined Contribution Plans Defined Benefit Plans CURRENT EMPLOYER AND/OR EMPLOYEE CONTRIBUTIONS FUTURE RETIREE BENEFITS Defined by agreement Dependent on success of employee’s investments ? ? Dependent on success of employer’s investments Defined by pension formula
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Different Measures of Obligation Chapter 17 page 4
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Three Entries for DB Pensions: Chapter 17 page 5
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Annual Expense Pension expense $$$ Pension asset / liability $$$ Chapter 17 page 6
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Components of Annual  Expense Component Effect on Pension  Expense Service Cost + Interest on Liability + Expected Return on Plan Assets Amortization of Prior Service Cost + Amortization of Net Gains / Losses + or − =    Pension Expense Total Chapter 17 page 7
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Components  continued Chapter 17 page 8
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Components  continued Service Cost example You go to work for Matrix, Inc. on 1/1/07. You are eligible to participate in the company's  You go to work for Matrix, Inc. on 1/1/07. You are eligible to participate in the company's  defined benefit pension plan. You are 25 years old when you start work and will  defined benefit pension plan. You are 25 years old when you start work and will  accumulate 40 years of service before retiring at age 65.  If your salary is $200,000 during  accumulate 40 years of service before retiring at age 65.  If your salary is $200,000 during  your last year of service, you will receive the following annual benefits: your last year of service, you will receive the following annual benefits: The benefit formula is:     You are not required to make any contributions.  The plan vests at the rate of  You are not required to make any contributions.  The plan vests at the rate of  20% per year.   20% per year.   The plan actuary:  The plan actuary:          estimates that upon reaching age 65, you will receive payments for 15 years 
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This note was uploaded on 09/20/2011 for the course ACCT 4120 taught by Professor Franz during the Spring '11 term at Toledo.

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Acct 4120 Chapter 17 Spiceland 5th edition - Acct4120...

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