Question

Exercise 20-16

The actuary for the pension plan of Flint Inc. calculated the following net gains and losses.

Incurred during the Year		(Gain) or Loss
2020		$302,900
2021		476,600
2022		(211,800)
2023		(292,200)

Other information about the company’s pension obligation and plan assets is as follows.

As of January 1,		Projected Benefit Obligation		Plan Assets (market-related asset value)
2020		$4,020,600		$2,393,400
2021		4,484,600		2,203,100
2022		4,973,800		2,609,500
2023		4,255,000		3,046,600

Flint Inc. has a stable labor force of 400 employees who are expected to receive benefits under the plan. The total service-years for all participating employees is 4,400. The beginning balance of accumulated OCI (G/L) is zero on January 1, 2020. The market-related value and the fair value of plan assets are the same for the 4-year period. Use the average remaining service life per employee as the basis for amortization.

Compute the minimum amount of accumulated OCI (G/L) amortized as a component of net periodic pension expense for each of the years 2020, 2021, 2022, and 2023. Apply the “corridor” approach in determining the amount to be amortized each year. (Round answers to 0 decimal places, e.g. 2,500.)

Year		Minimum Amortization of (Gain) Loss
2020		$enter a dollar amount rounded to 0 decimal places
2021		$enter a dollar amount rounded to 0 decimal places
2022		$enter a dollar amount rounded to 0 decimal places
2023		$enter a dollar amount rounded to 0 decimal places

Answer 1

Amortization of excess of the cumulative net gain or loss over the corridor amount = excess of the cumulative net gain or loss over the corridor amount/ average remaining service period of employees

Average remaining service life per employee= Expected future years of service/ Number of employees = 4400/400 = 11years

Year	Projected benfit obligation	Plan assets	Corridor	Accumulated OCI (G/L)	Minimum Amortization of (gain)/ loss
2020	4,020,600	2,393,400	402.060	0	0
2021	4,484,600	2,203,100	448.460	302,900	0
2022	4,973,800	2,609,500	497.380	779,500	25,647
2023	4,255,000	3,046,600	425.500	542,053	10,596

Corridor = 10% of the greater of projected benefit obligation or plan assets

Minimum Amortization of (Gain) Loss (2022)= (779,500 - 497380)/11 = 25,647

Accumulated OCI (G/L) (2023) = 779,500 - 25,647 - 211,800 = 542,053

Minimum Amortization of (Gain) Loss (2023) = (542,053 - 425,500)/11 = 10,596