How do you calculate the funded status of a postretirement benefit obligation?
Calculating the funded status of a postretirement benefit obligation involves comparing the accumulated postretirement benefit obligation (APBO) to the fair market value of the plan assets. If the plan assets is greater than the APBO, then the plan is overfunded and would be recorded as a non-current asset. If the plan assets are less than the APBO, then the plan is underfunded, and would be recorded as a current or non-current liability. The rules for postretirement benefit obligations are very similar to pensions.
For example, if Park City had plan assets of $950,000 and the accumulated postretirement benefit obligation was $1,000,000, the plan would be underfunded by $50,000.
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What is a postretirement benefit and what are some examples?
Postretirement benefits are benefits that are provided to an employee and their spouse after the employee retires. Some of common examples of postretirement benefits include healthcare, medical benefits, life insurance, dental care, legal, vision, tuition assistance, day care, and housing assistance.