Saver
Corporation amended its defined benefit pension plan at the beginning of its
2011 fiscal year, resulting in past service costs of $775,000. The vesting
period for Saver Corporation is seven years. The plan amendment is attributable
to the following employees:
Employees
with more than seven years’ service as at Jan. 1, 2011……..$475,000
Employees
with less than seven years’ service as at Jan. 1, 2011………$300,000
The
average period until vesting for the employees with less than seven years’
experience is 3.5 years. Calculate the past service cost that will be included
in the fiscal 2011 pension expense.
Pension Expense for 2011 related to past service costs:
|
Immediate recognition for vested employees:
|
$475,000
|
|
Amortization of costs for non-vested employees*:
|
$85,714
|
|
Total 2011 pension expense for past service costs
|
$560,714
|
*
Past service costs - non-vested employees: $300,000
Average years until vesting ÷ 3.5
Amortization per year $ 85,714
