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Pension plan
Pension plan - is an arrangement where by the employer
provides benefits (payments) to retired employees for the
services they provide in their working years.
- A pension plan is funded when the employer makes payments
to a funding agency. That agency accumulates the assets and
makes payments to the recipients
Vested benefits
Vested benefits are those that the employee is entitled to receive
even if he or she renders no additional services to the company.
Most pension plans require a certain minimum number of years
of service to the employer before an employee achieves vested
benefits status. Companies compute the vested benefit obligation
using only vested benefits, at current salary levels.
Settlement Rate
The assumed discount rate at which the pension benefits could
be "settled." Derived from rates in current annuity contracts.
Corridor approach
-to limit the growth of the accumulated OCI account, the FASB
-for amortizing the account's accumulated balance when its get
too large. The FASB set a limit of 10% of the larger of the
beginning balances of the projected benefit obligation or the
market-related value of the plan assets
-Above that size, the accumulated OCI account related to gains
and losses is consider too large and must be amortized
attribution period
The period of time over which the postretirement benefit cost
accrues is called the attribution period. It is the period of service
during which the employee earns the benefits under the terms of
the plan.
EPBO for retirees and active employees fully eligible for benefits.
Before the date an employee achieves full eligibility, the APBO is
only a portion of the EPBO. Or stated another way, the difference
between the APBO and the EPBO is the future service costs of
active employees who are not yet fully eli
Postretirement expense
Postretirement expense is the employer's annual expense for
postretirement benefits. Also called net periodic postretirement
benefit cost, this expense consists of many of the familiar
components used to compute annual pension expense. The
components of net periodic postretirement benefit cost are as
follows.