Question

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

Incurred during the Year		(Gain) or Loss
2020		$301,600
2021		475,200
2022		(209,400)
2023		(291,500)

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		$3,969,700		$2,389,400
2021		4,475,900		2,190,800
2022		5,031,000		2,587,400
2023		4,233,100		3,031,200

Kingbird 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

Average service life per employee = Expected total service years / Number of employees

= 4,400 / 400

= 11

Year	Projected Benefit Obligation	Plant Assets	Corridor (10% of greater of PBO or Plants Assets)	Cumulative Unrecognized (Gain) / Loss	Minimum Amortization of (Gain) / Loss
2020	$3,969,700	$2,389,400	$396,970	NIL	NIL
2021	$4,475,900	$2,190,800	4447,590	$301,600	NIL
2022	$5,031,000	$2,587,400	$503,100	$776,800 (301,600 + 475,200)	$24,882
2023	$4,233,100	$3,031,200	$423,310	$542,518	$10,837

Calculation:

Minimum Amortization for the year 2022 =(776,800 - 503,100) / 11

= 24,882

Cumulative unrecognized for year 2023 = 776,800 - 24,882 - 209,400

= 542,518

Minimum Amortization for the year 2023 = (542,518 - 423,310) / 11

= 10,837

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