1. Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.6% × service years × final year's salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 2002 and is expected to retire at the end of 2036 after 35 years' service. Her retirement is expected to span 18 years. Davenport's salary is $94,000 at the end of 2016 and the company's actuary projects her salary to be $300,000 at retirement. The actuary's discount rate is 8%.
At the beginning of 2017, changing economic conditions caused the actuary to reassess the applicable discount rate. It was decided that 9% is the appropriate rate. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required: Calculate the effect of the change in the assumed discount rate on the PBO at the beginning of 2017 with respect to Davenport.
The _______ on PBO is _______.
2. The projected benefit obligation was $320 million at the beginning of the year. Service cost for the year was $18 million. At the end of the year, pension benefits paid by the trustee were $14 million and there were no pension-related other comprehensive income accounts requiring amortization. The actuary’s discount rate was 5%.
What was the amount of the projected benefit obligation at year-end?
End of the year PBO_________million
3. Pension plan assets were $140 million at the beginning of the year. The return on plan assets was 5%. At the end of the year, retiree benefits paid by the trustee were $3 million and cash invested in the pension fund was $7 million.
What was the amount of the pension plan assets at year-end?
Pension plan assets ________million
4. On January 1, 2016, Medical Transport Company’s accumulated postretirement benefit obligation was $200 million. At the end of 2016, retiree benefits paid were $23 million. Service cost for 2016 is $15 million. Assumptions regarding the trend of future health care costs were revised at the end of 2016, causing the actuary to revise downward the estimate of the APBO by $6 million. The actuary’s discount rate is 8%.
Determine the amount of the accumulated postretirement benefit obligation at December 31, 2016.
APBO ________million