When does a government that participates in a defined contribution plan report a pension or OPEB liability in its financial statements?
The Statement 68 requires governments that participate in
defined benefit pension plans to report in their statement of net
position a net pension liability. The net pension liability is the
difference between the total pension liability (the present value
of projected benefit payments to employees based on their past
service) and the assets (mostly investments reported at fair value)
set aside in a trust and restricted to paying benefits to current
employees, retirees, and their beneficiaries.
The Statement calls for immediate recognition of more pension
expense than is currently required. This includes immediate
recognition of annual service cost and interest on the pension
liability and immediate recognition of the effect on the net
pension liability of changes in benefit terms. Other components of
pension expense will be recognized over a closed period that is
determined by the average remaining service period of the plan
members (both current and former employees, including retirees).
These other components include the effects on the net pension
liability of (a) changes in economic and demographic assumptions
used to project benefits and (b) differences between those
assumptions and actual experience. Lastly, the effects on the net
pension liability of differences between expected and actual
investment returns will be recognized in pension expense over a
closed five-year period.
Statement 68 requires cost-sharing employers to record a liability
and expense equal to their proportionate share of the collective
net pension liability and expense for the cost-sharing plan.
The Statement also will improve the comparability and consistency
of how governments calculate the pension liabilities and expense.
These changes include:
When does a government that participates in a defined contribution plan report a pension or OPEB...
A government offers a defined contribution pension plan for police and firemen. The General Fund makes its annual contribution to the pension trust. How should the receipt of this money be reported by the Pension Trust Fund? Multiple Choice o As an Addition contributions for employed o As a bity Due to General Funds o o As Other Financing Source o Asefund Avenue
Which of the following local governments is least likely to report a net pension liability for underfunded pension obligations? Multiple Choice None of the above, local governments do not report net pension liabilities. A local government participating in a state sponsored defined benefit pension plan. A local government acting as trustee for a defined benefit pension plan. A local government participating in a state sponsored defined contribution pension plan.
Brief Exercise 20-10 Sarasota Corp. has three defined benefit pension plans as follows. Plan X Pension Assets (at Fair Value) $641,000 860,000 558,000 Projected Benefit Obligation $493,000 665,000 739,000 Plan Y Plan z How will Sarasota report these multiple plans in its financial statements? Pension Asset $ Pension Liability Click if you would like to Show Work for this question: Open Show Work
Yuri Co. operates a chain of gift shops. The company maintains a defined contribution pension plan for its employees. The plan requires quarterly installments to be paid to the funding agent, Whims Funds, by the fifteenth of the month following the end of each quarter. Assume that the pension cost is $400,000 for the quarter ended December 31 Required: a. Journalize the entries to record the accrued pension liability on December 31 (on page 11 of the journal) and the...
"In a defined benefit plan, pension expense is equal to the firm s cash contribution." TRUE FALSE All of the following increase pension expense except: service cost. interest on the liability. amortization of prior service cost. all of these answers are correct.
Electronic Distribution has a defined benefit pension plan. Characteristics of the plan during 2018 are as follows: ($ millions) $ 630 450 100 80 PBO balance, January 1 Plan assets balance, January 1 Service cost Interest cost Gain from change in actuarial assumption Benefits paid Actual return on plan assets Contributions 2018 34 (66) 28 The expected long-term rate of return on plan assets was 8%. There were no AOCI balances related to pensions on January 1, 2018, but at...
Blount Company provides its employees with vacation benefits and a defined contribution pension plan. Employees earned vacation pay of $30,000 for the period. The pension plan requires a contribution to the plan administrator equal to 10% of employee salaries. Salaries were $400,000 during the period.Provide the journal entry for the (a) vacation pay and (b) pension benefit.Hobson Equipment Company provides its employees vacation benefits and a defined benefit pension plan. Employees earned vacation pay of $20,000 for the period. The...
What type of pension plan would an employer want to offer, a defined contribution plan or a defined benefit plan? Explain your reasoning behind your answer.
4. Zofia works for Red Corporation, which has a contributory defined contribution pension plan. The employer's monthly contribution to the plan is 4 percent of each participating mployee's monthly salary, while the employee also contributes 4 percent. Which of the following statements best describes the benefits of the plan? A) Red receives a deduction for its contributions to the plan when Zofia receives a distribution from the plan. B) While Zofia is taxed on the employer's contributions to the plan,...
Which of the following statements is correct with respect to a defined contribution plan? Multiple Choice The payments made by the employer to fund a defined contribution pension plan create a pension fund asset on the balance sheet of the employer. The employer receives a tax deduction for amounts contributed to the pension plan trust and subsequent investment retums do not generate tax for the employer. The anticipated life span of the employees after retirement must be taken into consideration...