FASB curtailment

[FAPInJax]

I am confusing myself with rational thoughts.

A plan has calculated numbers for FASB in the past and they were:

Ignoring all assumptions for the moment

Projected benefit 6,000

Service at retirement 20

Therefore, let's assume the service cost will be determined from the 300 earned benefit.

Let's further assume that the past service is 5 years.

This produces a PBO from the 1,500 earned benefit.

The actual accrued benefit is 5/20 * 4000 = 1,000.

This benefit will be used for the ABO.

Now, the client decides to terminate the plan.

Does the PBO immediately get determined using the 1,000 benefit??? Therefore, the service cost would go to zero. That seems to make logical sense but FASB 88 is confusing me during the readings.

Thanks to all for comments.

[david rigby]

Timing of the events/plan changes can be important.

In general, you will have

- A plan amendment freezing accruals. FAS88 curtailment. That's when the PBO becomes = ABO. Note importance of timing; if it occurs during the middle of a plan year (or is that fiscal year?), the sponsor should determine when to recognize it. Practicalities do factor into that decision. If recogized immediately, then the NPPC for the balance of the year will be redetermined (approximations may occur).

- A plan termination, resulting in distribution of benefits. May occur much later than the freeze. If so, ongoing determination of NPPC, with zero svc cost. FAS88 settlement.

FAS88 tells us to recognized a curtailment when it can reasonable be measured, but recogize a settlement when it occurs.

Have I left out something?

[Guest DBtech]

Is the rule still to recognize a curtailment/settlement loss when reasonably estimable, and a curtailment gain only when it actually occurs?