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Exam 17: Pensions and Other Postretirement Benefits

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Question 21

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Which of the following is not an uncertainty that complicates determining how much to set aside each year to ensure that sufficient funds are available to provide the benefits promised under a defined benefit plan?

A) Employee turnover.
B) Number of employees who retired last year.
C) Future inflation rates.
D) Future compensation levels.

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Question 22

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The expected postretirement benefit obligation is the discounted present value of the total benefits expected to be paid by the employer to the plan participants.

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Question 23

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The following information is related to the defined benefit pension plan of Dreamworld Company for the year: Assuming no other relevant data exist, what is the pension expense for the year?

Eligibility for postretirement health care benefits usually is based on the employee's:

The following information is related to the defined benefit pension plan of Simpson Company for the year: Assuming no other relevant data exist, what is the pension expense for the year?

On January 1, 2013, Tom's Transport Company's accumulated postretirement benefit obligation was $30,000,000. At the end of 2013, retiree benefits paid were $3,500,000. Service cost for 2013 is $6,000,000. At the end of 2013, there was no prior service cost or net gain or loss. Assumptions regarding the trend of future health care costs were revised at the end of 2013. This revision caused the actuary to revise downward the estimate of the APBO by $500,000. The appropriate discount rate was 6%. Required: Determine the amount of the accumulated postretirement benefit obligation at December 31, 2013.

Lender 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 calendar year, the following plan-related data were available. On January 1 of the current year, Lender amends the plan to provide dental benefits. The actuary determines that the cost of making the amendment increases the APBO by $20,000,000. Management chooses to amortize this amount on a straight-line basis. The service cost is $40,000,000. The appropriate interest rate is 10%. Required: Calculate the postretirement benefit expense for the current year.

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

The amount of cash paid annually for unfunded postretirement health benefit plans, assuming they are not independently insured, usually is equal to:

ERISA made major changes in the requirements for pension plan:

Fox Company received the following reports of its defined benefit pension plan for the current calendar year: The long-term expected rate of return on plan assets is 8%. Assuming no other data are relevant, what is the pension expense for the year?

On January 1, 2012, WOW amended its defined benefit pension plan. The amount of prior service costs caused by this action was $720,000. WOW uses the service method for amortizing prior service costs. The following service years were provided by the company actuary: 2012, 20; 2013, 15; 2014, 12; 2015, 8; and 2016, 5. Twenty employees benefit from this amendment. In 2013, the amortization amount would be:

Defined contribution pension plans that link the amount of contributions to company performance are often called:

The three components of pension expense that are present most often are:

According to generally accepted accounting principles, accounting for postretirement benefits other than pensions must adhere to the:

Which one of the following assumptions is needed to estimate both postretirement health care benefits and pension benefits?

Consider the following: I. Present value of vested benefits at present pay levels. II) Present value of nonvested benefits at present pay levels. III) Present value of additional benefits related to projected pay increases. Which of the above constitutes the vested benefit obligation?

Which of the following describes defined benefit pension plans?

Payment of retirement benefits:

The amount of the vested benefit obligation is less than the projected benefit obligation and more than the accumulated benefit obligation.