Refer to the example of HTSM Corp. in Appendix 19A and assume it is now 2018, three years after the defined benefit pension plan was initiated. In December 2018, HTSM's actuary provided the company with an actuarial revaluation of the plan. The actuary's assumptions included the following changes:
Estimated final salary on retirement ...................... $145,000
Current settlement/discount rate .................................. 7%
Instructions
(a) Calculate the defined benefit obligation at December 31, 2018, and the amount of any actuarial gain or loss.
(b) Based on the revised assumptions at the end of the year, determine what percentage increase or decrease there would be in the DBO for:
1. A 1% increase in the discount rate
2. A 1% decrease in the discount rate
(c) Determine the effect of the actuarial revaluation on the pension plan's surplus or deficit at December 31, 2018, and on pension expense for 2018 and for 2019.
(d) Based on the revised assumptions, recalculate the past service cost that was incurred by the company in 2020.