Question

The information below pertains to the retiree health care plan of Thompson Technologies: ($ in 000s) 2018 Beginning Balances 2018 Ending Balances Accumulated postretirement benefit obligation $ 740 $ 765 Plan assets 0 75 Funded status (740 ) (690 ) Prior service cost–AOCI 215 166 Net gain–AOCI (69 ) (68 ) Thompson began funding the plan in 2018 with a contribution of $146,000 to the benefit fund at the end of the year. Retirees were paid $57,000. The actuary’s discount rate is 5%. There were no changes in actuarial estimates and assumptions. Required: 1. Determine the service cost for 2018. 2. Determine the postretirement benefit expense for 2018. 3. Determine the net benefit liability for 2018.

Answer 1

Solution :-

1 :-

Account titles	Amount in ( $ 000s )
Beginning of 2018	$ 740
Interest Cost	= $740 * 5% = $37
Retireee benefit	$57
End of 2018	$765
Service cost for 2018	= 765 + 57 - [ $ 740+  $37 ] = 822 - 777 = $45

2 :-

Account titles	Amount in ( $ 000s )
Service cost	$57
Interest cost	$37
Amortization of prior service cost	= 215 - 166 = $49
Net gain	= -69 - (- 68 ) = -69 + 68 = - $1
Post retirement benefit in 2018	= $57 + $37 + $49 - $1 = $143 - $1 = $142

3 :-

Account titles	Amount in ( $ 000s )
Accumulated post retirement benefits obligation	$765
Plan assets	$75
Net postretirement benefit liability for 2018	= $765 - $75 = $690