The projected benefit obligation was $380 million at the beginning of the year a
ID: 2329699 • Letter: T
Question
The projected benefit obligation was $380 million at the beginning of the year and $407 million at the end of the year. At the end of the year, pension benefits paid by the trustee were $17 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 service cost for the year?
The projected benefit obligation was $380 million at the beginning of the year and $407 million at the end of the year. At the end of the year, pension benefits paid by the trustee were $17 million and there were no pension-related other comprehensive income accounts requiring amortization. The actuary’s discount rate was 5%.
Explanation / Answer
Solution: Service cost $ 25 million Working Notes: $ in million Beginning of the year PBO 380 Add: Service cost 25 Balancing figure Add: Interest cost 19 [ disc rate 5% x 380 beg. PBO } Loss or (gain) on PBO 0 Less: Retiree benefits(paid by trustee) (17) End of the year PBO 407 From above 380 + service cost + 19 - 17 = 407 Service cost = 407 + 17 - 19 - 380 Service cost = $25 million Please feel free to ask if anything about above solution in comment section of the question.
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