Southeast Technology provides postretirement health care
benefits to employees. On January 1, 2021, the following
plan-related data were available:
($ in thousands) | |||
Prior service cost—originated in 2016 | $ | 50 | |
Accumulated postretirement benefit obligation | 530 | ||
Fair value of plan assets | none | ||
Average remaining service period to retirement | 20 years (same in previous 10 years) | ||
Average remaining service period to full eligibility | 15 years (same in previous 10 years) | ||
On January 1, 2021, Southeast amends the plan in response to
spiraling health care costs. The amendment establishes an annual
maximum of $3,000 for medical benefits that the plan will provide.
The actuary determines that the effect of this amendment is to
decrease the APBO by $80,000. Management amortizes prior service
cost on a straight-line basis. The interest rate is 8%. The service
cost for 2021 is $114,000.
Required:
1. Complete the below table to calculate the prior
service cost amortization for 2021.
2. Complete the below table to calculate the
postretirement benefit expense for 2021.
1) | |
prior - Service cost Amortization for 2021 | |
Particulars | Amount (in $ thousands) |
Prior service cost | $50 |
Reduction for amendment | ($80) |
Revised Prior service cost | $30 |
Service period (Years) | 15 years |
Amortization ($30 / 15) | $2 |
prior - Service cost Amortization for 2021 = $2 | |
2) | |
Post-retirement benefit expense for 2021 | |
Particulars | Amount (in $ thousands) |
Service cost | $114 |
Interest cost (8%($530 (-) $80)) |
$36 |
Return on plan assets | $0 |
Amortization of prior service Cost | ($2) |
Postretirement benefit expense | $148 |
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