To be acceptable, any method of transition from compliance with Standard 9904.412 in effect prior to March 30, 1995, to compliance with the Standard effective March 30, 1995, must follow the equitable principle that costs, which have been previously provided for, shall not be redundantly provided for under revised methods. Conversely, costs that have not previously been provided for must be provided for under the revised method. This transition subsection is not intended to qualify for purposes of assignment or allocation, pension costs which have previously been disallowed for reasons other than ERISA tax-deductibility limitations. The sum of all portions of unfunded actuarial liability identified pursuant to Standard 9904.412, effective March 30, 1995, including such portions of unfunded actuarial liability determined for transition purposes, is subject to the provisions of 9904.412-40(c) on requirements for assignment. The method, or methods, employed to achieve an equitable transition shall be consistent with the provisions of Standard 9904.412, effective March 30, 1995, and shall be approved by the contracting officer. Examples and illustrations of such transition methods include, but are not limited to, the following:
(a) Reassignment of certain prior unfunded accruals. (1) Any portion of pension cost for a qualified defined-benefit pension plan, assigned to a cost accounting period prior to March 30, 1995, which was not funded because such cost exceeded the maximum tax-deductible amount, determined in accordance with ERISA, shall be assigned to subsequent accounting periods, including an adjustment for interest, as an assignable cost deficit. However, such costs shall be assigned to periods on or after March 30, 1995, only to the extent that such costs have not previously been allocated as cost or price to contracts subject to this Standard.
(1) Any portion of pension cost for a qualified defined-benefit pension plan, assigned to a cost accounting period prior to March 30, 1995, which was not funded because such cost exceeded the maximum tax-deductible amount, determined in accordance with ERISA, shall be assigned to subsequent accounting periods, including an adjustment for interest, as an assignable cost deficit. However, such costs shall be assigned to periods on or after March 30, 1995, only to the extent that such costs have not previously been allocated as cost or price to contracts subject to this Standard.
(2) Alternatively, the transition method described in paragraph (d) of this subsection may be applied separately to costs subject to paragraph (a)(1) of this subsection.
(b) Reassignment of certain prior unallocated credits. (1) Any portion of pension cost for a defined-benefit pension plan, assigned to a cost accounting period prior to March 30, 1995, which was not allocated as a cost or price credit to contracts subject to this Standard because such cost was less than zero, shall be assigned to subsequent accounting periods, including an adjustment for interest, as an assignable cost credit.
(1) Any portion of pension cost for a defined-benefit pension plan, assigned to a cost accounting period prior to March 30, 1995, which was not allocated as a cost or price credit to contracts subject to this Standard because such cost was less than zero, shall be assigned to subsequent accounting periods, including an adjustment for interest, as an assignable cost credit.
(2) Alternatively, the transition method described in paragraph (d) of this subsection may be applied separately to costs subject to paragraph (b)(1) of this subsection.
(c) Accounting for certain prior allocated unfunded accruals. Any portion of unfunded pension cost for a nonqualified defined-benefit pension plan, assigned to a cost accounting period prior to March 30, 1995, that was allocated as cost or price to contracts subject to this Standard, shall be recognized in subsequent accounting periods, including adjustments for imputed interest and benefit payments, as an accumulated value of permitted unfunded accruals.
(d) ``Fresh start'' alternative transition method. The transition methods of paragraphs (a)(1), (b)(1), and (c) of this subsection may be implemented using the so-called ``fresh start'' method whereby a portion of the unfunded actuarial liability of a defined-benefit pension plan, which occurs in the first cost accounting period after March 30, 1995, shall be treated in the same manner as an actuarial gain or loss. Such portion of unfunded actuarial liability shall exclude any portion of unfunded actuarial liability that must continue to be separately identified and maintained in accordance with 9904.412-50(a)(2), including interest adjustments. If the contracting officer already has approved a different amortization period for the fresh start amortization, then such amortization period shall continue.
(e) Change to pay-as-you-go method. A change in accounting method subject to 9903.302 will have occurred whenever costs of a nonqualified defined-benefit pension plan have been accounted for on an accrual basis prior to March 30, 1995, and the contractor must change to the pay-as-you-go cost method because the plan does not meet the requirement of 9904.412-50(c)(3), either by election or otherwise. In such case, any portion of unfunded pension cost, assigned to a cost accounting period prior to March 30, 1995 that was allocated as cost or price to contracts subject to this Standard, shall be assigned to future accounting periods, including adjustments for imputed interest and benefit payments, as an accumulated value of permitted unfunded accruals. Costs computed under the pay-as-you-go cost method shall be charged against such accumulated value of permitted unfunded accruals before such costs may be allocated to contracts.
(f) Actuarial assumptions. The actuarial assumptions used to calculate assignable cost deficits, assignable cost credits, or accumulated values of permitted unfunded accruals for transition purposes shall be consistent with the long term assumptions used for valuation purposes for such prior periods unless the contracting officer has previously approved the use of other reasonable assumptions.
(g) Transition illustrations. Unless otherwise noted, paragraphs (g) (1) through (9) of this subsection address pension costs and transition amounts determined for the first cost accounting period beginning on or after the date this revised Standard becomes applicable to a contractor. For purposes of these illustrations an interest assumption of 7% is presumed to be in effect for all periods.
(1) For the cost accounting period immediately preceding the date this revised Standard was applicable to a contractor, Contractor S computed and assigned pension cost of $1 million for a qualified defined-benefit pension plan. The contractor made a contribution equal to the maximum tax-deductible amount of $800,000 for the period leaving $200,000 of assigned cost unfunded for the period. Except for this $200,000, no other assigned pension costs have ever been unfunded or otherwise disallowed. Using the transition method of paragraph (a)(1) of this subsection, the contractor shall establish an assignable cost deficit equal to $214,000 ($200,000x1.07), which is the prior unfunded assigned cost plus interest. If this assignable cost deficit amount, plus all other portions of unfunded actuarial liability identified in accordance with 9904.412-50(a) (1) and (2), equal the total unfunded actuarial liability, pension cost may be assigned to the current period.
(2) Assume that Contractor S in 9904.412-64(g)(1) priced the entire $1 million into firm fixed-price contracts. In this case, no assignable cost deficit amount may be established. In addition, the $214,000 ($200,000x1.07) shall be separately identified and maintained in accordance with 9904.412-50(a)(2). If all portions of unfunded actuarial liability identified in accordance with 9904.412-50(a) (1) and (2), equal the total unfunded actuarial liability, pension cost may be assigned to the period.
(3) Assume the same facts as in 9904.412-64(g)(1), except Contractor S only funded and allocated $500,000. The $300,000 of assigned cost that was not funded, but could have been funded without exceeding the tax-deductible maximum, may not be recognized as an assignable cost deficit. Instead, the $300,000 must be separately identified and maintained in accordance with 9904.412-50(a)(2). If the $321,000 ($300,000x1.07) plus the $214,000 already identified as an assignable cost deficit plus all other portions of unfunded actuarial liability identified in accordance with 9904.412-50(a) (1) and (2), equal the total unfunded actuarial liability, pension cost may be assigned to the period.
(4) Assume that, for Contractor S in 9904.412-64(g)(3), the only portion of unfunded actuarial liability that must be identified under 9904.412-50(a)(2) is the $321,000. If Contractor S chooses to use the ``fresh start'' transition method, the $321,000 of unfunded assigned cost must be subtracted from the total unfunded actuarial liability in accordance with 9904.412-63(d). The net amount of unfunded actuarial liability shall then be amortized over a period of fifteen years as an actuarial loss in accordance with 9904.412-50(a)(1)(v) and Cost Accounting Standard 9904.413.
(5) For the cost accounting period immediately preceding the date this revised Standard becomes applicable to a contractor, Contractor T computed and assigned pension cost of negative $400,000 for a qualified defined-benefit plan. Because the contractor could not withdraw assets from the trust fund, the contracting officer agreed that instead of allocating a current period credit to contracts, the negative costs would be carried forward, with interest, and offset against future pension costs allocated to the contract. Using the transition method of paragraph (b)(1) of this subsection, the contractor shall establish an assignable cost credit equal to $428,000 ($400,000x1.07). If this assignable cost credit amount, plus all other portions of unfunded actuarial liability identified in accordance with 9904.412-50(a) (1) and (2), equals the total unfunded actuarial liability, pension cost may be assigned to the period.
(6) Assume that in 9904.412-64(g)(5), following guidance issued by the contracting agency the contracting officer had deemed the cost for the prior period to be $0. In order to satisfy the requirements of 9904.412-40(c) and assign pension cost to the current period, Contractor S must account for the prior period negative accruals that have not been specifically identified. Following the transition method of paragraph (b)(1) of this subsection, the contractor shall identify $428,000 as an assignable cost credit.
(7) Assume the facts of 9904.412-64(g)(5), except Contractor S uses the ``fresh start'' transition method. In addition, for the current period the plan is overfunded since the actuarial value of the assets is greater than the actuarial accrued liability. In this case, an actuarial gain equal to the negative unfunded actuarial liability; i.e., actuarial surplus, is recognized since there are no portions of unfunded actuarial liability that must be identified under 9904.412-50(a)(2).
(8) Since March 28, 1989 Contractor U has computed, assigned, and allocated pension costs for a nonqualified defined-benefit plan on an accrual basis. The value of these past accruals, increased for imputed interest at 7% and decreased for benefits paid by the contractor, is equal to $2 million as of the beginning of the current period. Contractor U elects to establish a ``Rabbi trust'' and the plan meets the other criteria at 9904.412-50(c)(3). Using the transition method of paragraph (c) of this subsection, Contractor U shall recognize the $2 million as the accumulated value of permitted unfunded accruals, which will then be included in the market value and actuarial value of the assets. Because the accumulated value of permitted unfunded accruals is exactly equal to the current period market value of the assets, 100% of benefits for the current period must be paid from sources other than the funding agency in accordance with 9904.412-50(d)(2)(ii).
(9) Assume that Contractor U in 9904.412-64(g)(8) establishes a funding agency, but elects to use the pay-as-you-go method for current and future pension costs. Furthermore, plan participants receive $500,000 in benefits on the last day of the current period. Using the transition method of paragraph (e) of this subsection to ensure prior costs are not redundantly provided for, the contractor shall establish assets; i.e., an accumulated value of permitted unfunded accruals, of $2 million. Since these assets are sufficient to provide for the current benefit payments, no pension costs can be allocated in this period. Furthermore, previously priced contracts subject to this Standard shall be adjusted in accordance with 9903.302. The accumulated value of permitted unfunded accruals shall be carried forward to the next period by adding $140,000 (7%x$2 million) of imputed interest, and subtracting the $500,000 of benefit payments made by the contractor. The accumulated value of permitted unfunded accruals for the next period equals $1,640,000 ($2 million + $140,000--$500,000). [60 FR 16547, Mar. 30, 1995; 60 FR 20248, Apr. 25, 1995] Sec. 9904.412-64.1 Transition Method for the CAS Pension Harmonization
Rule.
Contractors or subcontractors that become subject to the Standard, as amended, during the Pension Harmonization Transition Period shall recognize the change in cost accounting method in accordance with paragraphs (a) and (b).
(a) The Pension Harmonization Rule Transition Period is the five cost accounting periods beginning with a contractor's first cost accounting period beginning after June 30, 2012, and is independent of the receipt date of a contract or subcontract subject to this Standard. The Pension Harmonization Rule Transition Period begins on the first day of a contractor's first cost accounting period that begins after June 30, 2012.
(b) Phase in of the Minimum Actuarial Liability and Minimum Normal Cost. During each successive accounting period of Pension Harmonization Rule Transition Period, the contractor shall recognize on a scheduled basis the amount by which the minimum actuarial liability differs from the actuarial accrued liability; and the amount by which the sum of the minimum normal cost plus any expense load differs from the sum of the normal cost plus any expense load.
(1) For purposes of determining the amount of the difference, the minimum actuarial liability and minimum normal cost shall be measured in accordance with 9904.412-50(b)(7)(ii).
(2) During each successive accounting period of the Pension Harmonization Rule Transition Period, the transitional minimum actuarial liability shall be set equal to the actuarial accrued liability adjusted by an amount equal to the difference between the minimum actuarial liability and actuarial accrued liability, multiplied by the scheduled applicable percentage for that period. The sum of the transitional minimum normal cost plus any expense load shall be set equal to the sum of normal cost plus any expense load, adjusted by an amount equal to the difference between the minimum normal cost and the normal cost, plus expense loads, multiplied by the scheduled applicable percentage for that period.
(3) The scheduled applicable percentages for each successive accounting period of the Pension Harmonization Rule Transition Period are as follows: 0% for the First Cost Accounting Period, 25% for the Second Cost Accounting Period, 50% for the Third Cost Accounting Period, 75% for the Fourth Cost Accounting Period, and 100% for the Fifth Cost Accounting Period.
(4) The transitional minimum actuarial liability and transitional minimum normal cost measured in accordance with this provision shall be used for purposes of the 9904.412-50(b)(7) minimum actuarial liability and minimum normal cost.
(5) The actuarial gain or loss attributable to experience since the prior valuation, measured as of the First Cost Accounting Period of the Pension Harmonization Rule Transition Period, shall be amortized over a ten-year period in accordance with 9904.413-50(a)(2)(ii).
(c) Transition Illustration. Assume the same facts for the Harmony Corporation in Illustration 9904.412-60.1(a) and (b), except that this is the Fourth Cost Accounting Period of the Pension Harmonization Rule Transition Period. As in Illustration 9904.412-60.1(a) and (b), the contractor separately computes pension costs for Segment 1, and computes pension costs for Segments 2 through 7 in the aggregate. The contractor has two actuarial valuations prepared: one measures the actuarial accrued liability and normal cost using the contractor's expected rate of return on investments assumption, in accordance with 9904.412-40(b)(2) and 9904.412-50(b)(4), and the other valuation measures the minimum actuarial liability and minimum normal cost based on the assumed current yields on investment quality corporate bonds in accordance with 9904.412-50(b)(7)(iii)(A). The actuarial valuations present the values subtotaled for each segment and in total for the plan as a whole.
(1) The contractor applies 9904.412-64.1(b) as follows:
(i) (A) For Segment 1, the $494,000 ($2,594,000--$2,100,000) difference between the minimum actuarial liability and the actuarial accrued liability is multiplied by 75%. Therefore for Segment 1, the minimum actuarial liability for purposes of 9904.412-50(b)(7) is adjusted to a transitional minimum actuarial liability of $2,470,500 ($2,100,000+[75%x$494,000]).
(A) For Segment 1, the $494,000 ($2,594,000--$2,100,000) difference between the minimum actuarial liability and the actuarial accrued liability is multiplied by 75%. Therefore for Segment 1, the minimum actuarial liability for purposes of 9904.412-50(b)(7) is adjusted to a transitional minimum actuarial liability of $2,470,500 ($2,100,000+[75%x$494,000]).
(B) For Segments 2 through 7, the ($183,000) difference ($14,042,000-$14,225,000) between the minimum actuarial liability and the actuarial accrued liability is multiplied by 75%. For Segment 2 through 7, the minimum actuarial liability for purposes of 9904.412-50(b)(7) is adjusted to a transitional minimum actuarial liability of $14,087,750 ($14,225,000+[75%x($183,000)]).
(C) The computation of the transitional minimum actuarial liability that incrementally recognizes the difference between the minimum actuarial liability and the actuarial accrued liability for Segment 1, and for Segments 2 through 7, is shown in Table 1 below:
Table 1--Development of Transitional Minimum Actuarial Liability for Fourth Transition Period----------------------------------------------------------------------------------------------------------------
Segments 2
Total plan Segment 1 through 7 Notes----------------------------------------------------------------------------------------------------------------
(Note 1) ............... ...............Minimum Actuarial Liability...................... ................ $2,594,000 $14,042,000 2
(2,100,000) (14,225,000) 3
----------------------------------Actuarial Accrued Liability...................... ................ (2,100,000) (14,225,000) .........Actuarial Accrued Liability Difference........... ................ $494,000 $(183,000) 4Phase In Percentage (Period 4)................... ................ 75% 75% 5
----------------------------------Phase In Liability Difference.................... ................ $370,500 $(137,250) 6Actuarial Accrued Liability...................... ................ 2,100,000 14,225,000 6
----------------------------------Transitional Minimum:
Actuarial Liability.......................... ................ $2,470,500 $14,087,750----------------------------------------------------------------------------------------------------------------Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
applied separately for each segment.Note 2: See Illustration 9904.412-60.1(b)(2)(ii), Table 4.Note 3: See Illustration 9904.412-60.1(b)(2)(i), Table 3.Note 4: The phase in percentage will be applied to positive or negative differences in the actuarial
liabilities, since the purpose of the phase in is to incrementally move the measurement away from the
actuarial accrued liability to the minimum actuarial liability, regardless of the direction of the movement.Note 5: Appropriate transition percentage for the Fourth Cost Accounting Period of the Pension Harmonization
Rule Transition Period as stipulated in 9904.412-64.1(b)(3).Note 6: The actuarial accrued liability is adjusted by the phase in difference between liabilities, either
positive or negative, in accordance with 9904.412-64.1(b)(2).
(ii) (A) For Segment 1, the $21,740 ($110,840-$89,100) difference between the minimum normal cost and the normal cost, plus expense loads, is multiplied by 75%. Therefore for Segment 1, the minimum normal cost plus expense load, for purposes of 9904.412-50(b)(7), is adjusted to a transitional minimum normal cost plus expense load of $105,405 ($89,100 + [75%x$21,740]).
(A) For Segment 1, the $21,740 ($110,840-$89,100) difference between the minimum normal cost and the normal cost, plus expense loads, is multiplied by 75%. Therefore for Segment 1, the minimum normal cost plus expense load, for purposes of 9904.412-50(b)(7), is adjusted to a transitional minimum normal cost plus expense load of $105,405 ($89,100 + [75%x$21,740]).
(B) For Segments 2 through 7, the 92,260 ($913,860-$821,600) difference between the minimum normal cost and the normal cost, plus expense loads, is multiplied by 75%. Therefore, for Segments 2 through 7, the minimum normal cost for purposes of 9904.412-50(b)(7) is adjusted to a transitional minimum normal cost plus expense load of $890,795 ($821,600+[75%x$92,260]).
(C) The computation of the transitional minimum normal cost plus expense load for Segment 1, and for Segments 2 through 7, is shown in Table 2 below:
Table 2--Development of Transitional Minimum Normal Cost for Fourth Transition Period----------------------------------------------------------------------------------------------------------------
Segments 2
Total plan Segment 1 through 7 Notes----------------------------------------------------------------------------------------------------------------
(Note 1) ............... ...............Minimum Normal Cost.............................. ................ $102,000 $840,700 2Expense Load on Normal Cost...................... ................ 8,840 73,160 2, 3
----------------------------------Minimum Normal Cost Plus Expense Load............ ................ $110,840 $913,860 2Normal Cost Plus Expense Load.................... ................ (89,100) (821,600) 4
----------------------------------Difference....................................... ................ $21,740 $92,260 5Phase In Percentage (Period 4)................... ................ 75% 75% 6
----------------------------------Phase In Normal Cost Difference.................. ................ $16,305 $69,195 7Normal Cost Plus Expense Load.................... ................ 89,100 821,600 7
----------------------------------Transitional Minimum:
Normal Cost Plus Expense Load................ ................ $105,405 $890,795----------------------------------------------------------------------------------------------------------------Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
applied separately for each segment.Note 2: See Illustration 9904.412-60.1(b)(2)(ii), Table 4.Note 3: For minimum normal cost valuation purposes, the contractor explicitly identifies the expected
administrative expenses as a separate component of minimum normal cost.
Note 4: See Illustration 9904.412-60.1(b)(2)(i), Table 3. Expected expenses are implicitly recognized as part of
the contractor's expected rate of return on investments assumption.Note 5: The phase in percentage will be applied to positive and negative differences in the normal costs plus
expense loads, since the purpose of the phase in is to incrementally move the measurement from the normal cost
plus expense load, to the minimum normal cost plus expense load, regardless of the direction of the movement.Note 6: Appropriate transition percentage for the Fourth Cost Accounting Period of the Pension Harmonization
Rule Transition Period stipulated in 9904.412-64.1(b)(3).Note 7: The sum of the normal cost plus expense load is adjusted by the phase in difference between normal
costs, either positive or negative, in accordance with 9904.412-64.1(b)(2).
(2) The contractor applies the provisions of with 9904.412-50(b)(7)(i) using the transitional minimum actuarial liability and transitional minimum normal cost plus expense load, in accordance with 9904.412-64.1(b)(4).
(i) The comparison of the sum of the actuarial accrued liability and normal cost plus expense load, and the sum of the transitional minimum actuarial liability and minimum normal cost plus expense load, for Segment 1, and for Segments 2 through 7, is summarized in Table 3 below:
Table 3--Summary of Liability and Normal Cost Values for Fourth Transition Period----------------------------------------------------------------------------------------------------------------
Segments 2
Total plan Segment 1 through 7 Notes----------------------------------------------------------------------------------------------------------------
(Note 1) ............... ...............``Going Concern'' Liabilities for Period:
Actuarial Accrued Liability.................. ................ $2,100,000 $14,225,000 2
Normal Cost Plus Expense Load................ ................ 89,100 821,600 3
--------------------------------------------
,s,nTotal Liability for Period.......... ................ 2,189,100 15,046,600Transitional Minimum Liabilities for the Period:
Transitional Minimum Actuarial Liability..... ................ 2,470,500 14,087,750 1
Transitional Minimum Normal Cost Plus Expense ................ 105,405 890,795 3
Load........................................
--------------------------------------------
,s,nTotal Transitional Minimum Liability for ................ 2,575,905 14,978,545 4
Period......................................----------------------------------------------------------------------------------------------------------------Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
applied separately for each segment.Note 2: See Table 1.Note 3: See Table 2.Note 4: If the threshold criterion is met, then the pension cost for the period is measured based on the
Transitional Minimum Actuarial Liability and Transition Normal Cost Plus Expense Load.
(ii) For Segment 1, the Total Transitional Minimum Liability for the Period of $2,575,905 exceeds the total liability for the period of $2,189,100. (See Table 3.) Therefore, in accordance with 9904.412-50(b)(7)(i), the pension cost for Segment 1 is measured using the actuarial accrued liability and normal cost as measured by the transitional minimum actuarial liability and transitional minimum normal cost, which are based on the accrued benefit cost method. This measurement complies with the requirements of 9904.412-50(b)(7) and with the definition of actuarial accrued liability, 9904.412-30(a)(2), and normal cost, 9904.412-30(a)(18).
(iii) For Segments 2 through 7, the total liability for the period of $15,046,600 exceeds the Total Transitional Minimum Liability for the Period of $14,978,545. (See Table 3.) Therefore, in accordance with 9904.412-50(b)(7)(i), the pension cost for Segment 2 through 7 is measured using the actuarial accrued liability and normal cost, which are based on the projected benefit cost method.
(3) The contractor computes the pension cost for the period in accordance with the provisions of 9904.412-50(b)(7)(i), which considers the transitional minimum actuarial liability and transitional minimum normal cost plus expense load, in accordance with 9904.412-64.1(b).
(i) The contractor computes the unfunded actuarial liability as shown in Table 4 below:
Table 4--Unfunded Actuarial Liability for Fourth Transition Period----------------------------------------------------------------------------------------------------------------
Segments 2
Total Plan Segment 1 through 7 Notes----------------------------------------------------------------------------------------------------------------
(Note 1)Actuarial Accrued Liability...................... ................ $2,470,500 $14,225,000 2CAS Actuarial Value of Assets.................... ................ (1,688,757) (11,872,928) 3
--------------------------------------------,s,nUnfunded Actuarial Liability................ ................ 781,743 2,352,072----------------------------------------------------------------------------------------------------------------Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
applied separately for each segment.Note 2: Because the Pension Harmonization criterion of 9904.412-50(b)(7)(i) has been met for Segment 1, the
actuarial accrued liability is measured by the transitional minimum actuarial liability as required by
9904.412-64.1(b)(4). See Table 3. Because the Pension Harmonization criterion of 9904.412-50(b)(7)(i) was not
satisfied for Segments 2 through 7, the actuarial accrued liability is based on the actuarial assumptions that
reflect long-term trends in accordance with 9904.412-50(b)(4), i.e., the transitional minimum actuarial
liability does not apply.Note 3: See Illustration 9904.412-60.1(b)(1)(ii), Table 2.
(ii) Measurement of the Pension Cost for the current period (Table 5):
Table 5--Pension Cost for Fourth Transition Period----------------------------------------------------------------------------------------------------------------
Segments 2
Total plan Segment 1 through 7 Notes----------------------------------------------------------------------------------------------------------------
(Note 1)Normal Cost Plus Expense Load..................... ............... $105,405 $821,600 2Amortization Installments......................... ............... 101,990 314,437 3, 4
--------------------------------------------,s,nPension Cost Computed for the Period......... 1,343,432 207,395 1,136,037----------------------------------------------------------------------------------------------------------------Note 1: Except for the Total Pension Cost Computed for the Period, the values for the Total Plan are not shown
because the 9904.412-50(b)(7)(i) threshold criterion is applied separately for each segment.Note 2: See Table 3. Because the Pension Harmonization criterion of 9904.412-50(b)(7)(i) has been met for
Segment 1, the sum of the normal cost plus the expense load is measured by the sum of the transitional minimum
normal cost plus the expense load, as required by 9904.412-64.1(a). Because the Pension Harmonization
criterion of 9904.412-50(b)(7)(i) was not satisfied for Segments 2 through 7, the sum of the normal cost plus
any applicable expense load is based on the contractor's actuarial assumptions reflecting long-term trends in
accordance with 9904.412-40(b)(2) and 9904.412-50(b)(4), i.e., the transitional minimum normal cost plus the
expense load does not apply.Note 3: Net amortization installment based on the unfunded actuarial liability of $781,743 for Segment 1, and
$2,352,072 for Segments 2 through 7, including an interest equivalent on the unamortized portion of such
liability. See Table 4. The interest adjustment is based on the contractor's interest rate assumption in
compliance with 9904.412-40(b)(2) and 9904.412-50(b)(4).Note 4: See 9904.64-1(c)(4) for details concerning the recognition of the unfunded actuarial liability during
the first Pension Harmonization Rule Transition Period.
(4) The Silvertone Corporation separately computes pension costs for Segment 1, and computes pension costs for Segments 2 through 7 in the aggregate.
(i) For the First Cost Accounting Period of the Pension Harmonization Rule Transition Period, the difference between the actuarial accrued liability and the minimum actuarial liability, and the difference between the normal cost and the minimum normal cost, are multiplied by 0%. Therefore the transitional minimum actuarial liability and transitional minimum normal are equal to the actuarial accrued liability and normal cost. The total transitional minimum liability for the period does not exceed the total liability for the period in conformity with the criterion of 9904.412-50(b)(7)(i). Therefore, the pension cost for the First Cost Accounting Period of the Pension Harmonization Rule Transition Period is computed using the actuarial accrued liability and normal cost.
(ii) The actuarial gain attributable to experience during the prior period that is measured for the cost accounting period is amortized over a ten-year period in accordance with 9904.412-50(a)(1)(v) and 9904.413-50(a)(2)(ii).
(iii) The contractor computes the pension cost for First Cost Accounting Period of the Pension Harmonization Rule Transition Period as shown in Table 6 below.
Table 6--Computation of the Pension for the First Transition Period----------------------------------------------------------------------------------------------------------------
Segments 2
Total plan Segment 1 through 7 Notes----------------------------------------------------------------------------------------------------------------
(Note 1)
Amortization of Unfunded Liability Net ................ $81,019 $523,801 2
Amortization Installment from Prior Periods.....
January 1, 2013, Actuarial Loss (Gain) ................ (9,369) (68,740) 3
Amortization Installment....................
----------------------------------Net Amortization Installment..................... ................ 71,650 455,061Normal Cost plus expense load.................... ................ 78,400 715,000 4
----------------------------------Pension Cost Computed for the Period............. ................ 150,050 1,170,061----------------------------------------------------------------------------------------------------------------Note 1: The values for the Total Plan are not shown because the 9904.412-50(b)(7)(i) threshold criterion is
applied separately for each segment.Note 2: Amortization installments of actuarial gains and losses, and other portions of the unfunded actuarial
liability identified prior to January 1, 2013, in accordance with 9904.412-50(a)(1)(v) and 9904.413-
50(b)(2)(ii), including an interest adjustment based on the contractor's long-term interest assumption in
compliance with 9904.412-40(b)(2) and 9904.412-50(b)(4).Note 3: The actuarial gains for both Segment 1, and Segments 2 through 7, as measured as of January 1, 2013, are
amortized over a ten-year period in accordance with 9904.413-50(a)(2)(ii) and 9904.412-64-1(b)(4). Note that
although the source of the actuarial gains was the deviation between assumed and actual changes during the
prior period, the gain is measured on January 1, 2013, and so the ten-year amortization period applies in the
current period, including an interest adjustment based on the contractor's long-term interest assumption in
compliance with 9904.412-40(b)(2) and 9904.412-50(b)(4).Note 4: For the first period of the Pension Harmonization Rule transition period, the adjustment to the sum of
the actuarial accrued liability and normal cost is adjusted by $0. Therefore the sum of the transitional
minimum actuarial liability and transitional minimum normal cost plus expense load is equal to the sum of the
actuarial accrued liability and normal cost plus expense load, and the criterion of 9904.412-50(b)(7)(i) was
not met for either Segment 1, or Segments 2 through 7. The sum of the normal cost plus expense load is based
on the sum of the going concern normal cost plus expense load. [76 FR 81319, Dec. 27, 2011, as amended at 77 FR 43543, July 25, 2012]