Century-Fox Corporation’s employees are eligible for postretirement health care benefits after both beingemployed at the end of the year in which age 60 is attained and having worked 20 years. Jason Snyder was hiredat the end of 1993 by Century-Fox at age 34 and is expected to retire at the end of 2021 (age 62). His retirementis expected to span five years (unrealistically short in order to simplify calculations). The company’s actuary hasestimated the net cost of retiree benefits in each retirement year as shown below. The discount rate is 6%. Theplan is not prefunded. Assume costs are incurred at the end of each year.Year Expected Age Net Cost2022 63 $4,0002023 64 4,4002024 65 2,3002025 66 2,5002026 67 2,800Required:1. Draw a time line that depicts Snyder’s attribution period for retiree benefits and expected retirement period.2. Calculate the present value of the net benefits as of the expected retirement date.3. With respect to Snyder, what is the company’s expected postretirement benefit obligation at the end of 2016?4. With respect to Snyder, what is the company’s accumulated postretirement benefit obligation at the end of 2016?5. With respect to Snyder, what is the company’s accumulated postretirement benefit obligation at the end of 2017?6. What is the service cost to be included in 2017 postretirement benefit expense?7. What is the interest cost to be included in 2017 postretirement benefit expense?8. Show how the APBO changed during 2017 by reconciling the beginning and ending balances.
Century-Fox Corporation’s employees are eligible for postretirement health care benefits after both being
employed at the end of the year in which age 60 is attained and having worked 20 years. Jason Snyder was hired
at the end of 1993 by Century-Fox at age 34 and is expected to retire at the end of 2021 (age 62). His retirement
is expected to span five years (unrealistically short in order to simplify calculations). The company’s actuary has
estimated the net cost of retiree benefits in each retirement year as shown below. The discount rate is 6%. The
plan is not prefunded. Assume costs are incurred at the end of each year.
Year Expected Age Net Cost
2022 63 $4,000
2023 64 4,400
2024 65 2,300
2025 66 2,500
2026 67 2,800
Required:
1. Draw a time line that depicts Snyder’s attribution period for retiree benefits and expected retirement period.
2. Calculate the present value of the net benefits as of the expected retirement date.
3. With respect to Snyder, what is the company’s expected postretirement benefit obligation at the end of 2016?
4. With respect to Snyder, what is the company’s accumulated postretirement benefit obligation at the end of 2016?
5. With respect to Snyder, what is the company’s accumulated postretirement benefit obligation at the end of 2017?
6. What is the service cost to be included in 2017 postretirement benefit expense?
7. What is the interest cost to be included in 2017 postretirement benefit expense?
8. Show how the APBO changed during 2017 by reconciling the beginning and ending balances.
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