Question

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

Incurred during the Year		(Gain) or Loss
2020		$298,500
2021		482,900
2022		(211,700)
2023		(288,000)

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		$3,988,200		$2,397,300
2021		4,537,500		2,220,600
2022		5,045,300		2,594,600
2023		4,257,500		3,013,300

Monty 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 6,000. 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

Corridor Approach:
Unexpected gains or losses lead to an increase or decrease in the pension asset or liability, these gains or losses are recorded in the liability through Other Comprehensive Income. and not through the income statement. They are amortized only if the amount becomes too large, and this amortization passes through the income statement.

Year	Cumulative Net loss/ (Gain)	Projected Benefit Obligation (PBO)	Plan Assets	10%of Higher of PBO or Plan assets	Excess net loss/(Gain)	Average service life 6000/400=15 yrs on 2020	Amortised net gain /loss
2020	298500	3988200	2397300	398820	0	15	0
2021	781400 (298500+482900)	4537500	2220600	453750	327650	14	23404 (327650/14)
2022	546296 (781400-23404-211700)	5045300	2594600	504530	41766	13	3213
2023	255083 (546296-3213-288000)	4257500	3013300	425750	0	12	0