Question

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

Incurred during the Year		(Gain) or Loss
2020		$299,600
2021		478,600
2022		(210,400)
2023		(290,800)

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		$4,034,300		$2,411,500
2021		4,505,600		2,206,200
2022		4,986,900		2,584,700
2023		4,244,300		3,040,500

Kempachi 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 5,200. 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

Solution:

Year	Project benefit obligation	Plan assets (market related asset value)	Corridor (10% of greater value of PBo plan assets)	Accumulated other comprehensive income (gain or loss)	Minimum amortization of gain or loss
2020	4,034,300	2,411,500	403,430	-	-
2021	4,505,600	2,206,200	450,560	299,600	-
2022	4,986,900	2,584,700	498,690	778,200 (299,600 +478,600)	21,500
2023	4,244,300	3,040,500	424,430	546,300	9,374

Working:

No of service year per employee:

= total service years/ Total no of employees

=5,200/400

=13 years

Minimum amortrization for 2022:

=(778,200 - 498,690)13

=$21,500

Accumulated OCI for 2023:

=778,200 - 21,500 - 210,400

=$546,300

Minimum amortization for 2023:

=(546,300 - 424,430)/13

=9,374

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