Chapter 17

Question 1

Pension Plans

Answer 1

Designed to provide income to indiv during their retirement years.

Question 2

Defined Contribution Pension Plans

Answer 2

Promised a fixed annual contributions to a pension fund. Based on years of service, annual comp, and sometimes age Employer control

Question 3

Defined Benefit Pension Plans

Answer 3

Promised fixed retirement benefits designed by designated formula Employee control

Question 4

Uncertainties

Answer 4

Rate of return, # employees eligible, age at reitrement, life expectancies, and inflation

Question 5

Accumulated Benefit Obligation

Answer 5

Estimate of retirement benefits using existing compensation level

Question 6

Vested benefit obligation

Answer 6

Part of the obligation that employees are entitles to

Question 7

Projected benefit obligation

Answer 7

TOTAL retirement benefits using estimated future compensation levels

Question 8

Projected Benefit Obligation

Answer 8

Less reliable but more relevant using BS and IS

Question 9

Change in PBO

Answer 9

Service cost, interest cost, gains/losses, prior service cost

Question 10

Service Cost

Answer 10

Increase in PBO

Question 11

Interest Cost

Answer 11

Increases PBO, calc directly

Question 12

Prior Service Cost

Answer 12

When pension is amended Increases the PBO

Question 13

Gains/Losses PBO

Answer 13

Decreases with a gain and increases with a lose

Question 14

Pension Plan Assets

Answer 14

Resource a company will provide retirement benefits

Question 15

Expected Return on Plan Asset

Answer 15

Accum Balance + Return on invest