FAS 87 - Mid Year Computations

[flosfur]

A company with Calendar yr fiscal year sponsors a DB plan with Calendar Yr Plan Yr - # of participants around 20. The company is not publicly traded.

For 4 years no one asked for FAS numbers and then suddenly the client's auditor (not their regular CPA) wanted FAS numbers for 2003 & 4 prior years. That was not a problem.

Now the auditor wants FAS numbers for June 30, 2004!!? I tried to discourage the auditor but he insists on having the mid-year numbers.

Is this common in the large plans or any size plans? If so, how does one handle this?

Of course, one can determine the ABO, PBO and the funded status at any time but what about the net periodic cost?

Must one collect the census data @ June or is it acceptable to make projections based on the last year-end census.

Just thinking loud - YOS for benefit accruals is 1000 hours during plan year. By June most employees would have worked 1000 hours and earned an additional year accrual thus producing a full year service cost and there will be no increase in the service cost from July thru December! Is this OK or for FASB, does one prorate the service cost for the half year even though the employees have earned a full yr benefit.

[MGB]

See the December, 2003 amendments to SFAS 132. All companies must report quarterly amounts now.

They are just one-fourth of the annual amounts -- no calculations necessary unless there has been an event causing a remeasurement. In some cases, the NPPC determined at the beginning of the year was an estimate (e.g., based on an old valuation) and the actual for the year is now better known (e.g., an updated valuation). In that case, you are disclosing the amounts now known instead of one-fourth of what was previously estimated.

There also needs to be an update (diclosure; not in the calculations) of any changes in expected contributions for the year.

[flosfur]

Proration of Periodic cost would be OK when benefits accrue based on lapsed time or benefits are career average. What about the 1000 hours requirement formula where an employees will accrue a full year benefit by June? Wouldn't the proration understate the periodic cost.

[MGB]

No. You are being WAAAAYYYYY too specific. The periodic cost is an annual amount, pure and simple.