Amortizing Pre-Paid Expense (Plan Termination)

[Andy the Actuary]

A well-funded frozen DB plan sponsored by a not-for-profit organization has a $4 million pre-paid pension asset (say it's all in "Liability For Pension Benefits"). The sponsor wants to terminate the Plan but does not want to run $4 million through expense in a single year.

Has anyone been involved with similar situations were the auditor has sanctioned (i.e., not written an unfavorable opinion) that the sponsor could expense this pre-paid over a number of years and then terminate the Plan when it has been written off?

[AndyH]

A well-funded frozen DB plan sponsored by a not-for-profit organization has a $4 million pre-paid pension asset (say it's all in "Liability For Pension Benefits"). The sponsor wants to terminate the Plan but does not want to run $4 million through expense in a single year.

Has anyone been involved with similar situations were the auditor has sanctioned (i.e., not written an unfavorable opinion) that the sponsor could expense this pre-paid over a number of years and then terminate the Plan when it has been written off?

Is there a large unrecognized loss? If so, wouldn't a shorter amortization period for losses accomplish the objective, or removal of the 10% corridor if used? We've had those changes approved by one of the large audit firms.

[Andy the Actuary]

A well-funded frozen DB plan sponsored by a not-for-profit organization has a $4 million pre-paid pension asset (say it's all in "Liability For Pension Benefits"). The sponsor wants to terminate the Plan but does not want to run $4 million through expense in a single year.

Has anyone been involved with similar situations were the auditor has sanctioned (i.e., not written an unfavorable opinion) that the sponsor could expense this pre-paid over a number of years and then terminate the Plan when it has been written off?

Is there a large unrecognized loss? If so, wouldn't a shorter amortization period for losses accomplish the objective, or removal of the 10% corridor if used? We've had those changes approved by one of the large audit firms.

Nope, its about 800K AOCI and 3,200K Liability for pension benefits. But, you've given me an idea. Thank you.