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ACC 3302 Ch. 20 Updated Version


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an arrangement whereby an employer provides benefits (payments) to retired employees for services they provided in their working years
Pension Plan
In this, the employer agrees to contribute to a pension trust a certain sum each period, based on a formula
Defined-contribution plan
Make predictions of mortality rates, employee turnover, interest and earnings rates, early retirement frequency, future salaries, and any other factors necessary to operate a pension plan
The deferred compensation obligation it has to its employees for their service under the terms of the pension plan
Pension obligation
The present value of vested and nonvested benefits accrued to date, based on employees' future salary levels
Projected Benefit Obligation
The amount payable adjusted to reflect the time value of money and the probability of payment between the present date and the expected date of payment
Actuarial Present Value
The expense caused by the increase in pension benefits payable (the PBO) to employees because of their services redered during the current year.
Service Cost
Accrues each year on the projected benefit obligation just as it does on any discounted debt
Interest Expense
Allocates the cost (PSC) of providing these retroactive benefits to pension expense in the future, specifically to the remaining service years of the affected employees
Amortization of Prior Service Cost
The increase in pension funds from interest, dividends, and realized and unrealized changes in the fair-market value of the plan assets
Actual Return on the Plan Assets
Sets a limit of 10% of the larger of the beginning balances of the PBO or the market-related value of the plan assets. Above that amount the Accumulated OCI account is considered too large and must be amortized
Corridor Amortization Approach
A deferred compenation arrangement whereby an employer promises to exchange future benefits for employees current services. Include health care benefits, educational benefits, advisory services, etc.
Post-retirement Benefit Plan
A plan in which the employers contribution is determined based on a specified formula, and any future benefits are earned on the investment of those contributions
Defined Contribution Plan
A plan that states the benefits to be received by the employees after retirement or the method of determining such benefits
Defined Benefit Plan
A plan in which the company makes periodic payments to a funding agency that assumes the responsibilty for safeguarding and investing the pension assets to earn a return on the investments for the pension plan, and for making payments to the recipients o
Funded Plan

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