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Question
https://newconnect.mheducation.com/flow/connecthtml GmailiCloud a YouTubeHorme sosu a sosu Blackboard D sosu 1 wet portal 2 San Diego State Un gi Rate My Professors h17 Pensions 6 Progressive Renter Help Save & E Che Classified Electronics has an unfunded retiree health care plan. Each of the company's three employees has been with the firm since its inception at the beginning of 2017 As of the end of 2018, the actuary estimates the total net cost of providing health care benefits to employees during their retirement years to have a present value of $52,000. Each of the employees will become fully eligible for benefits after 24 more years of service but aren't expected to retire for 35 more years. The interest rate is 8%. Required: 1. What is the expected postretirement 'benefit obliga 2. What is the accumulated postretirement benefit obligation at the end of 2018? 3. What is the expected postretirement benefit obligation at the end of 2019 4. What is the accumulated postretirement benefit obligation at the end of 2019? tion at the end of 2018? Book Hint postretirement benefit obligation 2018 S 52,000 ccumulated postretirement benetit obligation 2018 3 Expected postretrement beneit obligation 2019 4Accumulated postretirement benefit obligation 2019 Print S56,160 eferencesExplanation / Answer
Solution:
1. Expected postretirement benefit obligation 2018 is the present value i.e. $52,000
2. accumulated postretirement benefit obligation = $4,000
EPBO 2017 x fraction earned = EPBO 2018
$52,000 x 2/(2 + 24) = $4,000
3. expected postretirement benefit obligation = $56,160
EPBO 2017 x to accrue interest = EPBO 2018
$52,000 x 1.08 = $56,160
4. accumulated postretirement benefit obligation = $6,480
EPBO 2017 x fraction earned = EPBO 2018
$56,160 x 3/26 = $6,480
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