Case 16-8 Frozen Ballooning Out of Control LLC ("BOC" or the "Company") is a manufacturer of hot air balloons. Because of decreased demand for hot air balloons and challenging industry conditions, BOC's management is exploring ways to reduce the Company's rapidly rising compensation and benefit costs. Management has determined it will either (1) amend the Company's single-employer defined benefit pension plan by eliminating the future earning of pension benefits for its employees (i.e., freeze its pension plan) or (2) reduce headcount across the Company by 5 percent. Either option will require approval by BOC's board of directors. If BOC decides to freeze its current pension plan, it will not offer any new pension benefits to its employees through another plan. BOC's current pension plan is the only retirement benefit arrangement it provides to its employees. The plan's pension benefits are based on years of service and average salary for the last five years of the employee's service period, and all employees, both hourly and salaried, who have attained six months of service are participants in the pension plan. Under the plan freeze, the Company will eliminate the accrual of additional pension benefits for future service. However, the Company will continue to take future salary increases into account in computing the average salary for the last five years before retirement when determining the pension benefits earned for service before the plan freeze. (This type of plan amendment is commonly referred to as a "soft freeze.") The pension plan freeze will be effective on October 1, the beginning of BOC's next fiscal year, and is expected to be approved and communicated to employees before BOC's September 30 year-end If BOC's management decides instead to reduce costs by reducing headcount by 5 percent, it anticipates that the board of directors would approve the reductions and management would communicate its plans to the affected employees before September 30. Before choosing which cost-cutting plan to recommend to the board of directors management would like to determine how to account for each alternative