Non-qualifed supplemental plan with SFAS 87 accounting

[david rigby]

Non-qualified supplemental plan. Vanilla. SFAS 87 accounting rules.

Vested EE terminates employment and goes to work for a competitor. Sponsor state that this violates the non-compete clause in the plan. Forfeits the entire liability for this EE, thus increasing the accumulated gain (or decreasing the accumulated loss) in SFAS 87 balance sheet.

But EE files lawsuit. If the suit/settlement later results in some payment to the EE, should this be accounted for as if it is paid under the plan (even if not specified)?

What if a settlement is reached after the plan no longer exists?

Any specific cites?

[Guest]

In general, I have always felt that FAS 87 is accounting and as such, the accountant should make the ultimate call. I tend to feel that the opinion of the actuary is third behind the accountants and the company.

That being said, I think the accountants tend to value liabilities early and gains late, therefore, if it hasn't been decided for sure that the benefit won't be paid, I can see justification for leaving it on the books, but again, I don't think it's really the actuaries call.

P.S. I was waiting for your comments on the "DB Plan and Tax Deductions" posts. I guess you decided to stay clear of that one.