[Working-Hard]

Hi All,

I’m trying to get a fast reply here. If I ask the customer support, it’ll take them 3 business days to get back to me.

Please kindly help if you get this part.

At December 31, Year 1, the employees participating in the plan had an average remaining service period

of 10 years. During Year 2, the company completed the amortization of its unrecognized net transition

obligation, made a contribution of $275,000, and paid benefits of $200,000. The Year 2 service cost was

$300,000. The company uses an expected return on plan assets of 8% when calculating net periodic

pension cost, but had an actual return on Plan A’s assets of 10% in Year 2. The company’s discount rate

is 6%.

12/31/Y1 Unrecognized prior service cost $175,000

12/31/Y2 Unrecognized prior service cost $157,500

Q/A: Amortization of service cost for Year 2: 175,000/10yr = $17,500

My question: I thought the period of pension is the GREATER of 15 year or service period.

So why was it not divided by 15 yr instead?

Please kindly advice. Thanks a lot in advance.

[Anonymous]

Somebody may want to corroborate this, but I believe the greater of average employee job life or 15 years applies to the amortization of existing net obligation/net asset at implementation. Whereas amortization of unrecognized PSC (prior service cost) is just divided by the average remaining service life. Hope that helps. Pensions are tricky bitches!

[Working-Hard]

Thanks a lot for the reply and info, BaseballCPA.

[Author]

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