Consistent with the provisions of the Pension Protection Act, the annual contribution is limited to an amount that would cause pension fund assets to exceed 150% of the accumulated benefit obligation.
The value of the current liability is approximated by the accumulated benefit obligation.
The major changes in pension accounting included the promulgation of two separate pension obligation measures (accumulated and projected) and the requirement that the unfunded portion of the accumulated benefit obligation (and since FAS 158, the projected benefit obligation) appear on the balance sheet.
The disclosures for earlier annual periods presented for comparative purposes shall be restated for (a) the percentages of each major category of plan assets held, (b) the accumulated benefit obligation, and (c) the assumptions used in the accounting for the plans.
The accumulated benefit obligation differs from the projected benefit obligation in that it includes no assumption about future compensation levels.
With a little math, users can now determine that the fair value of plan assets, $223 million, exceeded the total accumulated benefit obligation of $212 million.
SFAS 132(R) continues to require some detail for plans in which the accumulated benefit obligation exceeds plan assets.
Starting in 2003, companies were again required to disclose the aggregate accumulated benefit obligation.
Plans in which assets exceed accumulated benefits ($ in thousands) 2003 2002 Projected benefit obligation (2) Vested NA NA Nonvested NA NA Accumulated benefit obligation $183,155 $161,744 Provision for future pay increases 39,335 30,254 Projected benefit obligation 222,490 191,998 Plan assets at market value 198,535 168,528 Funded status 23,955) (23,470) Plus: Unrecognized transition asset 297-[X.
Finally, OPEB accounting requires the disclosure of the amortization of the unrecognized transition obligation as a separate component of net periodic cost, the effect of a one percentage point increase in the assumed health-care trend rate on the accumulated benefit obligation
, the service cost, and interest cost.
The importance of the choice of discount rate on accumulated benefit obligations
is highlighted by a rule of thumb used by actuaries (Trowbridge, Fair, 1977) that attributes a 20% decrease in such obligations to a 1% increase in the discount rate used in the calculation.
This means that an additional liability, beyond unfunded accrued pension cost, would be recognized if necessary, so that the total liability recognized would equal the unfunded accumulated benefit obligation