Question

Which of the following statements is not accurate with respect to accounting for other post-retirement plan benefits (OPEB)?

Multiple Choice

• A decrease in the discount rate assumption used may lead to a large gain for a company.

• A company which shifts its former salaried employees from its post-65 retiree health plan to spending accounts that allow participants to buy health care from private exchanges creates a reduction in earned benefits referred to as a negative plan amendment.

• Firms are required to make sensitivity disclosures regarding the effect of a 1% increase or decrease in the health care trend rate assumption.

• The actuarially determined service cost of the plan is accrued over the required years of service to participate in the postretirement benefit plan (e.g. 10 years).

Answer 1

The correct option is 'A: a decrease in the discount rate assumption used may lead to a larger gain for a company'

A decrease in the discount rate assumption may lead to larger loss as the company need to provide more funds to fund the future benefits earned by the employs. The remaining three options sensitivity disclosures, service cost determination and shifting employees from health plan to spending accounts are correct.