The following data are for the pension plan for the employees of Oriole Company.

Question

The following data are for the pension plan for the employees of Oriole Company.

Oriole’s contribution was $750000 in 2018 and benefits paid were $660000. Oriole estimates that the average remaining service life is 15 years.

Assume that the actual return on plan assets in 2018 was $440000. The unexpected gain on plan assets in 2018 was

1/1/17 12/31/17 12/31/18 Accumulated benefit obligation $ 4100000 $ 4300000 $ 5900000 Projected benefit obligation 4500000 4700000 6500000 Plan assets (at fair value) 3700000 5100000 5700000 AOCL – net loss 0 879000 910000 Settlement rate (for year) 11% 10% Expected rate of return (for year) 9% 6%

Explanation / Answer

SOLUTION

Unexpected gain on plan assets in 2018 was $134,000

Unexpected gain on plan assets in 2018 =

= Actual Return - (Fair value of plan asset on 12/31/17 * Expected Rate of return on 12/31/18)

= $440,000 - ($5,100,000 * 6%)

= $440,000 - $306,000

= $134,000

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