FAR pensions and OPEB: plan types, expense, PBO, funded status, and OCI

The rules, one page each

1. Defined Contribution vs Defined Benefit: Risk and ExpenseSide by side

   Defined contribution expense equals the required employer contribution for current service, and participants bear investment risk. Defined benefit plans measure net periodic pension cost, and the employer remains obligated for promised benefits.

2. Projected benefit obligation: rollforward, service vs interest, gains, and amendmentsWorked example

   Beginning PBO plus service cost and interest cost plus or minus actuarial changes and amendments minus benefits paid equals ending PBO; interest cost uses the discount rate applied to beginning PBO.

3. Net periodic pension cost: components, signs, and where to presentSort it

   Net periodic pension cost equals service cost plus interest cost minus expected return on plan assets plus amortization of prior service cost plus or minus amortization of net actuarial gain or loss; present service cost with compensation and present non-service components below operating income.

4. Plan assets: expected vs actual return and rollforwardWorked example

   Expected return in NPC uses the expected long-term rate applied to the specified asset base; actual return is determined in the plan asset rollforward and the difference from expected return is recognized in OCI as part of actuarial gains or losses.

5. Funded status and classification: asset or liability, current vs noncurrentStep by step

   Funded status equals fair value of plan assets minus the projected benefit obligation for pensions (or APBO for OPEB); report each plan net as an asset or liability without offsetting, and classify any current portion of an underfunded status based on next-year benefits due versus available plan assets.

6. Prior service cost: record amendments, amortize, and handle curtailmentsTimeline

   Recognize the full present value effect of a benefit amendment in OCI at the amendment date; amortize prior service cost over the average remaining service of affected active employees, and recognize the portion tied to service that will not be rendered after a curtailment or settlement.

7. Actuarial gains and losses: corridor test and amortizationWorked example

   Compute 10% of the larger of beginning PBO or market-related value of plan assets; amortize only the excess net loss or net gain in AOCI on a systematic basis over the average remaining service of active employees, unless inactive participants dominate, in which case use their average remaining life.