Hass Foods Inc. sponsors a post-retirement medical and dental benefit plan for its employees. The company adopted the provisions of IAS 19 beginning January 1, 2011. Assume that Hass is permitted to account for any transitional balances on a prospective basis, recognizing the transitional costs on a straight-line basis over five years. The following balances relate to this plan on January 1, 2011:
Plan assets .................$ 780,000
Accrued post-retirement benefit obligation .....3,439,800
Past service costs ...............–0–
As a result of the plan’s operation during 2011, the following additional data were provided by the actuary:
1. The service cost for 2011 was $273,000.
2. The discount rate was 9%.
3. Funding payments in 2011 were $234,000.
4. The expected return on plan assets was $35,100.
5. The actual return on plan assets was $58,500.
6. The benefits paid on behalf of retirees from the plan were $171,600.
7. The average remaining service life to full eligibility was 20 years.
Instructions
(a) Calculate the post-retirement benefit expense for 2011.
(b) Prepare a continuity schedule for the accrued benefit obligation and for the plan assets from the beginning of the year to the end of 2011.
(c) At December 31, 2011, prepare a schedule reconciling the plan’s funded status with the post-retirement amount reported on the balance sheet.
(d) Explain in what ways, if any, the accounting requirements for this plan are different from the requirements for a defined benefit pension plan.