Card Set Information
Pensions and Postretirement Benefits
The deferred compensation obligation it has to its employees for their service under the terms of the pension
The employees bear part of the cost of the stated benefits or voluntarily make payments to increase their benefits.
Funded: Over & Under
Measured as the difference between the fair value of the plan assets and the projected benefit obligation.
PBO > FV plan assets
PBO < FV plan assets
- Plans that offer tax benefits
- permit deductibility of the employer's contributions to the pension fund and tax-free status of earnings from pension fund assets.
The employer agrees to contribute to a pension trust
a certain sum each period, based on a formula. This formula may consider such
factors as age, length of employee service, employer’s profits, and
compensation level. The plan defines only the employer’s contribution. It makes
no promise regarding the ultimate benefits paid out to the employees. A common
form of this plan is a 401(k) plan.
Outlines the benefits that employees will receive
when they retire. These benefits typically are a function of an employee’s
years of service and of the compensation level in the years approaching
Benefits that the employee is entitled to receive
even if he or she renders no additional services to the company.
VBO (Vested Benefit Obligation)
Computed by using only vested benefits, at current
ABO (Accumulated Benefit Obligation)
a measurement of the pension obligation that uses
both vested and nonvested years of service. The company computes the deferred
compensation amount on all years of employees’ service – both vested and
nonvested – using current salary levels.
PBO (Projected Benefit Obligation)
a measurement of the pension obligation that bases
the deferred compensation amount on both vested and nonvested service using
the expense caused by the increase in pension
benefits payable (the projected benefit obligation) to employees because of
their services rendered during the current year. Actuaries compute service cost
as the present value of the new benefits earned by employees during the year.
An approach FASB invented to limit the growth of the
Accumulated OCI account and for amortizing the account’s accumulated balance
when it gets too large.
PBGC (Pension Benefit
Purpose is to administer terminated plans and to
impose liens on an employer’s assets for certain unfunded pension liabilities.
If a company terminates its pension plan, the PBGC can effectively impose a lien
against the employer’s assets for the excess of the present value of guaranteed
vested benefits over the pension fund assets