plan freeze FAS 88 curtailment

[Guest student_actuary]

Saw the below post on another website but with no satisfactory answers- I have a similar issue- all comments appreciated....

I have a plan that is frozen w.e.f 1-1-2010. I am currently doing disclosure work for year ending 12/31/2009 and under FAS 88 I plan to show the effect of the curtailment. -

Gain due to the curtailment (basically PBO – ABO = $400,000).

Accumulated loss in AOCI = $ 2,000,000

Transition gain/loss = $ 0

Prior Service Cost = $ 0

So I adjust the curtailment gain against the accumulated loss and still end up with a loss of $ 1,600,000. Future service of actives is about 10 years

What are my options of amortizing this loss

(a) amortize it over the next few years (say 3-4 years)

(b) recognize the entire loss in this year

© other???

Client plans to terminate plan sometime in 2010 but nothing has been confirmed as yet on this. I realize most of these decisions are based on discussion with auditor/client but they don’t really have much to say on this topic. I’d like to know what others in similar situations are doing……….

[david rigby]

How the loss is amortized is part of the accounting policy. The "10% corridor" approach in FAS87 is a minimum. Unless the sponsor is changing their accounting policy (in which case, they tell you, not vice versa), the remaining loss should be amortized in the same manner as before the curtailment. Generally, this means the new amount is "re-amortized".