Question

The following information relates to the pension plan for the employees of Turner Co.:

1/1/2012 12/31/2012 12/31/2013
Accum benefit obli $2,640,000.00 $2,760,000.00 $3,600,000.00
Projected benefit obl$2,790,000.00 $2,988,000.0 $4,002,000.00
FV of plan assets $2,550,000.00 $3,120,000.00 $3,444,000.00
AOCI - net (gain) or loss $- $(432,000.00) $(480,000.00)
Settlement rate for the year 11% 11%
Expected rate of return 8% 7%

Turner estimates that the average remaining service life is 16 years. Turner's contribution was $378,000 in 2013 and benefits paid were $282,000.

The actual return on plan assets in 2013 is _____________.

Answer 1

The actual return on plan assets in 2013 is -$1,146,000.

Step-by-step explanation:

The actual return on plan assets in 2013 can be calculated by subtracting the change in the accumulated benefit obligation (ABO) from the change in the fair value of plan assets. The formula for calculating the change in ABO is: Change in ABO = Projected benefit obligation (PBO) at the end of the year - Accumulated benefit obligation (ABO) at the beginning of the year.

Using the given data, the change in ABO for 2013 is ($4,002,000 - $2,760,000) = $1,242,000. The change in the fair value of plan assets is equal to the contributions made by Turner ($378,000) minus the benefits paid ($282,000), which is $96,000. Therefore, the actual return on plan assets in 2013 is ($96,000 - $1,242,000) = -$1,146,000.