Term
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Definition
| Payments by employers for vacation, holiday, illness, or other personal activities. |
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Term
| accumulated benefit obligation (ABO) |
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Definition
| The actuarial present value of pension benefits based on the plan formula for employee service earned to date using the existing salary structure; used to compute the minimum liability. |
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Term
| actual return on the pension fund |
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Definition
| A component of net periodic pension expense measured by the difference between the fair value of pension plan assets at the end of the period and the fair value at the beginning of the period, adjusted for contributions and payments of benefits during the period. |
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Term
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Definition
| The present value of pension obligations determined by using stated actuarial assumptions and estimates. |
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Term
| contributory pension plan |
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Definition
| A pension plan in which employees make contributions to the plan and thus bear part of the cost. |
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Term
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Definition
| An amount established as a minimum before amortization of pension gains and losses is required. Only amortization of unrecognized pension gains and losses that exceed of the greater of the projected benefit obligation or the market-related asset value as of the beginning of the period is included in the net periodic pension expense. Any systematic method of amortization that exceeds the minimum may be used as long as it is consistently applied to both gains and losses and it is disclosed in the statements. |
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Term
| curtailment of a pension plan |
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Definition
| An event that significantly reduces the expected number of years of future services of present employees or eliminates for a significant number of employees the accrual of defined benefits for their future services. |
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Term
| Deferred net pension gain or loss |
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Definition
| Cumulative amount after Other Comprehensive Income is closed at year-end to Accumulated Other Comprehensive Income. |
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Term
| deferred pension gain or loss |
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Definition
| Differences between expected results and actual experience in pension market value. |
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Term
| defined benefit pension plan |
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Definition
| Pension plans that define the benefits that employees will receive at retirement. In these plans, it is necessary to determine what the contribution should be to meet the future benefit requirements. FASB Statement No. 87 deals primarily with this type of pension plan. |
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Term
| defined contribution pension plan |
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Definition
| Pension plans that specify the employer’s contributions based on a formula that includes such factors as age, length of service, employer’s profits, and compensation levels. FASB Statement No. 87 does not deal with these types of plans. The pension expense is the amount funded each year. |
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Term
| expected return on the pension plan |
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Definition
| An amount calculated as a basis for determining the extent of delayed recognition of the effects of changes in the fair value of pension plan assets. The expected return on pension plan assets is determined based on the pension plan’s expected long-term rate of return and market-related value. |
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Term
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Definition
| Estimated number of years an employee will work before receiving pension benefits. Can be estimated as the average computed life based on the total expected future years of service divided by the number of employees. The expected future years of service may be computed by the formula [N(N+1)/2]*D, where N equals the number of years over which service is to be performed and D is the decrease in number of employees through retirement or termination of services per year. |
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Term
| fair value of the pension fund |
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Definition
| Value based on the pension fund’s market value at a given measurement date that increases each year by employer contributions to the fund and decreases by the retirement benefits paid; also changes by the amount of earnings on the pension fund, including changes in its market value. |
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Term
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Definition
| The date at which an employee attains full eligibility for the benefits that employee is expected to earn under the terms of a postretirement benefit plan. |
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Term
| market-related value of the pension fund |
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Definition
| Value of pension plan assets used in computing the expected return. Either of the following can be used as the market-related value: (1) the fair market value of pension plan assets as of the beginning of the year or (2) a weighted-average value based on the market value of plan assets over a preceding period not exceeding five years. |
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Term
| net periodic pension expenses |
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Definition
| The amount recognized in an employer’s financial statements as an expense of a pension plan for a period. Components of net periodic pension expense are service cost, interest cost, actual return on plan assets, pension gain or loss, amortization of unrecognized prior service cost, and amortization of deferred gain or loss in excess of the corridor amount. |
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Term
| noncontributory pension plans |
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Definition
| Plans in which the employer bears the total cost of the plan. |
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Term
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Definition
| The 10% discount rate used in the computation of the projected benefit obligation and viewed as the implied interest rate on this debt. |
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Term
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Definition
| Fund set aside to meet the employer’s future pension obligation. |
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Term
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Definition
| An agreement, usually written, that provides for benefits to employees upon retirement from active employment. The plan usually includes provisions as to how the benefits are to be funded, who receives benefits, the amount of benefits to be paid, and restrictions on investments of pension plan assets. |
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Term
| pension-related asset/liability |
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Definition
| An account used to reflect changes in the net pension asset or liability. |
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Term
| postretirement benefits other than pensions |
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Definition
| Benefits other than pensions provided by an employer to former employees. Includes health insurance, life insurance, and disability payments. Current standards require these benefits to be accrued in a manner similar to pension costs. |
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Term
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Definition
| The present value of the increased benefits granted by a pension plan’s amendment (or initial adoption of a plan). Recognized as a component of net periodic pension expense through amortization over the future service life of the covered employees. |
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Term
| projected benefit obligation (PBO) |
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Definition
| The actuarial present value of pension benefits using the benefits/years of service approach that requires assumptions about future compensation levels, such as increases over time by interest, amendments to the plan, additional service years, and changes in actuarial assumptions. |
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Term
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Definition
| A component of net periodic pension expense representing the actuarial present value of benefits accruing to employees for services rendered during that period. |
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Term
| settlement of a pension plan |
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Definition
| An irrevocable action taken by an employer that relieves the employer of primary responsibility for all or part of the pension obligation. Examples include purchasing from an insurance company an annuity that would cover employees’ vested benefits or a lump-sum payment to employees in exchange for their rights to receive specified pension benefits. |
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Term
| single-employer pension plans |
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Definition
| Pension plans established for a single employer. FASB Statement No. 87 primarily refers to this type of plan. |
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Term
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Definition
| The amount of pension benefits an employee will retain if employment with the employer is terminated. |
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Term
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Definition
| A general term used to describe the use of different estimates or accounting principles or reporting entities from those used in a prior year. |
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Term
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Definition
| Incorrect accounting treatment resulting from mathematical mistakes, improper application of accounting principles, or omissions of material facts. |
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Term
| change in accounting estimate |
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Definition
| A specific type of accounting change that modifies predictions of future events, for example, the useful life of a depreciable asset; changes in estimates are to be reflected in current and future periods. |
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Term
| change in accounting principle |
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Definition
| A specific type of accounting change that uses an accounting principle or method different from that used previously, for example, using straight-line depreciation instead of the declining-balance method. Generally, changes in principle require the reporting of a cumulative effect of the change in the current year’s income statement as well as pro forma information. |
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