Footnotes For Pension - Post Retirement PlansBusiness entities should disclose information that enables users of financial statements to evaluate the nature of its defined benefit plans as well as the financial statements effects of changes in those plans during the period. If a company has a defined benefit plan or other postretirement plan, in addition to a general description of the type of plan and accounting policy for recognizing actuarial gains and losses, it must disclose a considerable amount of information, as described on the next paragraphs.

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[1]. The company must reconcile the opening and closing balances of the present value of the defined benefit obligation, itemizing the current service cost, interest cost, participant contributions, actuarial gains and losses, changes in currency exchange rates, benefits paid, past service cost, plan amendments, business combinations, divestitures, curtailments, settlements, and special termination benefits.

Example:

For the year ended December 31, the changes in the projected benefit obligation of plan assets were:

                                                                              2009

Net benefit obligation—beginning of year      $257,000
Service costs incurred                                           4,000
Employee contributions                                      17,000
Interest costs on projected benefit obligation    15,000
Actuarial loss (gain)                                            (6,700)
Gross benefits paid                                           (15,300)
Plan amendment                                                      300
Foreign currency exchange rate change                2,400
Effect of spin-off                                              (66,000)
Net benefit obligation—end of year                $207,700

 

[2]. The company must reconcile the beginning and ending balances of the fair value of plan assets, itemizing the expected return on plan assets, actuarial gains and losses, changes in currency exchange rates, employer contributions, employee contributions, the gross benefit payment, business combinations, divestures, curtailments, and settlements.

Example:

For the year ended December 31, the changes in the projected fair value of plan assets were:

                                                                                   2009

Fair value of plan assets—beginning of year        $295,000
Expected return on plan assets                                40,000
Employer contributions (distributions)                      1,700
Plan participant contributions                                        —
Gross benefits paid                                               (15,300)
Foreign currency exchange rate change                       800
Effect of spin-off                                                  (79,500)
Fair value of plan assets—end of year                 $242,700

 

[3]. The company must provide information on the funded status and balance sheet recognition of the unamortized prior service cost, unrecognized net gain or loss, accrued liabilities or prepaid assets, intangible assets, and accumulated other comprehensive income resulting from the recording of an additional minimum liability.

Example:

The funded status for the year ended December 31 is

                                                                 2009

Over/(under) funded status                 $50,500
Unrecognized net transition asset         (2,500)
Unrecognized prior service costs               400
Unrecognized net loss                           32,800
Prepaid benefit cost recognized in
balance sheets                                    $81,200

As of December 31, the amounts recognized in the statement of financial position consist of:

                                                                       2009

Prepaid benefit cost (asset)                         $81,200
Accumulated other comprehensive loss              —
Net amount recognized at year-end           $81,200

 

[4]. The company must specify the net benefit cost recognized in the reporting period, showing the service cost, interest cost, expected return on plan assets, amortization of unrecognized transition assets or obligations, any recognized gains or losses, prior service costs, or settlement gain or loss.

Example:
 
The next table provides the components of the net periodic pension benefit income for the years ended December 31.

                                                              2007               2008             2009

Service costs incurred                 $3,601,000     $4,052,000    $2,768,000
Interest costs on projected
benefit obligation                        15,173,000    14,580,000    10,927,000
Expected return on plan assets    (3,603,000)    (2,953,000)    (2,133,000)
Amortization of prior service
cost                                                  165,000          192,000          87,000
Amortization of actuarial cost               —                 —                15,000
Amortization of transitional
obligation                                        773,000           772,000        586,000
Net periodic pension benefit
(income) expense                     $16,109,000    $16,643,000  $12,232,000

 

[5]. The company must list the assumed weighted-average discount rate, weightedaverage expected long-term rate on plan assets, and weighted-average compensation rate increase.

Example:

Assumptions used in the actuarial calculation include the discount rate selected and disclosed at the end of the previous year as well as other assumptions detailed in the next table, for the year ended December 31.

                                                   2009

Discount rate                              6.0%
Average salary increase rate       4.5%
Expected long-term rate of
return on assets                         7.5%

 

[6]. The company must list the percentage of the fair value of total plan assets invested in each category of plan assets.

Example:
 
The next table compares target asset allocation percentages as of the beginning of 2008 with actual asset allocations at the end of 2007.

                             Target allocations     Actual allocations
Equities                      40–80%                     62%
Fixed income             20–50%                     11%
Real estate                  0–10%                       4%
Other                          0–20%                      23%

 

[7]. The company must provide a description of the investment strategies used.

Example:

The plan’s established investment policy seeks to balance the need to maintain a viable and productive capital base and yet achieve investment results superior to the actuarial rate consistent with our funds’ investment objectives. Such an investment policy lends itself to a new asset allocation of approximately 50% investment in equities and property and 50% investment in debt securities. Asset allocations are subject to ongoing analysis and possible modification as basic capital market conditions change over time (interest rates, inflation, etc.).

 

[8]. The company must describe the logic used to derive the expected long-term return on assets.

Example:

Investment return assumptions for the plan have been determined by obtaining independent estimates of expected long-term rates of return by asset class and applying the returns to assets on a weighted-average basis.

 

[9]. It also must cite the accumulated benefit obligation (if the plan is a defined benefit plan).

Example:

The Company’s accumulated benefit obligation was $85,886,000 in 2008 and $80,450,000 in 2007

 

[10]. The company must list the benefits it expects to pay in each of the next five fiscal years and the aggregate expected payment for the following five years.

Example:

The next table provides the expected benefit payments for our pension plan.

2008               $8,553,000
2009                 8,447,000
2010                 8,377,000
2011                 8,466,000
2012                 8,527,000
2013–2017     49,231,000

 

[11]. The company must specify the expected amount of contributions to be paid into the plan during the next fiscal year.

Example:

The Company’s funding policy, with respect to its qualified pension plan, is to contribute annually not less than the minimum required by applicable law and regulations, or to directly pay benefit payments where appropriate.

 

[12]. It must cite the measurement dates used to calculate the plan benefits.

Example:

The Company uses a December 31 measurement date for its pension plan.

 

[13]. The company must list the trend rate in health care costs used to measure the expected cost of benefits as well as the time when the company expects that rate to be achieved.

Example:

                                                       2009     2008
Initial health care cost
trend rate                                      10.0%   10.5%
Ultimate health care cost
trend rate                                        5.0%     5.5%
Number of years to ultimate
trend rate                                         6           6

 

[14]. The company must specify the effect of a 1% increase and decrease in the assumed health care costs trend rate on the aggregated service and interest costs.

Example:

Assumed health care cost trend rates have a significant effect on the amounts reported for the retiree health care plan. A one-percentage-point change in assumed health care cost trend rates would have had these effects:

                                                    One-percentagepoint    One-percentagepoint
                                                    Increase                         Decrease

Effect on total service and
interest cost for the year
ended December 30, 2008         $ 454,000                       $ (357,000)
Effect on postretirement
benefit obligation as
of December 30, 2008               4,406,000                       (3,986,000)

 

[15]. The company must list he amount and types of related-party securities included in the plan.

Example:

Equity securities include the Company’s common stock in the amounts of $1.8 million (less than 1% of total pension plan assets) and $2.9 million (less than 1% of total pension plan assets) at December 31, 2009 and 2008, respectively. In addition, due to investment strategies used by the Company’s asset managers, the pension plan trust also holds short positions in the Company’s common stock, which had a value of $800,000 at December 31, 2008.

If a company has a defined contribution plan, it must disclose its cost as well as a description of the effect of significant changes affecting the plan.