b. Compare the pension plans of the three chemical companies. Are there any conc
ID: 2743499 • Letter: B
Question
b. Compare the pension plans of the three chemical companies. Are there any concerns? Explain.
4. Given below is pension information for 2014 from pension footnotes and other sources in millions). Benefit obligation at year-end is total pension liability based on PBO; pension expense is net periodic benefit cost; prepaid pension cost/obligation is net pension asset or liability position on the balance sheet (reported as part of other assets or other liabilities, if negative). DuPont Dow PPG Benefit Obligation at Year-End 29669 27979 5775 Fair Value of Plan Assets 20446 19629 3584 Net Periodic Benefit Cost -406 -705 -68 Prepaid Pension Cost 1693 1270 297 Total Assets 49876 68796 17583 Net Income 3636 3432 2159 51402 48173 9588 a. Calculate funding status (overfunded or underfunded, based on prepaid pension cost ), [pension obligation / total assets]; [prepaid pension cost (obligation) / total assets]; and [pension expense / net income]. Note: Net pension benefit cost is a negative expense for these companies (increases net income), because of positive expected return on plan assets. DuPont Dow PPG Over or Underfunded Benefit Obligation / Total Assets Prepaid Pension Cost / Total Assets Pension Expense / Net Incomeb. Compare the pension plans of the three chemical companies. Are there any concerns? Explain.
Explanation / Answer
Answer A) DuPont Dow PPG Benefit Obligation at Year-End 29669 27979 5775 Fair Value of Plan Assets 20446 19629 3584 Net Periodic Benefit Cost -406 -705 -68 Prepaid Pension Cost 1693 1270 297 Total Assets 49876 68796 17583 Net Income 3636 3432 2159 51402 48173 9588 Over or Underfunded Overfunded Overfunded Underfunded Benefit Obligation / Total Assets 0.59 0.41 0.33 Prepaid Pension Cost / Total Assets 0.03 0.02 0.02 Pension Expense / Net Income 0.47 0.37 0.14 B) The Supont & Dow both have surplus benefit obligation compare to PPG. The plant assets fair value also more . The net periodic benefit cost of PPG is very low. The net income of PPG is vey good compare to Dupont & Dow. The prepaid pension cost/Total assets for Dow & PPG are same .
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