E10-33. Analyzing and Interpreting Pension Disclosures General Mills Inc. reports the following pension footnote in its 10-K report. Defined Benefit Pension Plans ($ millions), Fiscal Year 2016 Change in Plan Assets Fair value at beginning of year Actual return on assets. ..... Employer contributions. Plan participant contributions .. Benefits payments ..... Foreign currency. Fair value at end of year ........ $5,758.5 36.3 23.7 ... 5.7 (2775) ....... (6.8) $5,539.9 Change in Projected Benefit Obligation Benefit obligation at beginning of year ............. $6,252.1 Service cost ........ 134.6 Interest cost ........... 267.8 Plan amendment .. 0.9 Curtailment/other..... Plan participant contributions .. 5.7 Medicare Part D reimbursements. 65.2 Benefits payments ........ (278.0) Foreign currency....... (6.9) Projected benefit obligation at end of year ............ $6,448.5 71 ....... Estimated benefit payments ... are expected to be paid from fiscal 2017-2026 as follows: Defined Benefit $ millions Pension Plans 2017. .................. $0 277.7 2018. 2879 2019. 2971 2020 .............. 306.8 2021.......... 316.4 2022-2026............... .. 1,731.5 a. Describe what is meant by service cost and interest cost. b. What is the total amount paid to retirees during fiscal 2016? What is the source of funds to make these payments to retirees? c. Compute the 2016 funded status for the company's pension plan. d. What are actuarial gains and losses? What are the plan amendment adjustments, and how do they differ from the actuarial gains and losses? e. General Mills projects payments to retirees of about $300 million per year. How is the company able to contribute only $23.7 million to its pension plan? f. What effect would a substantial decline in the financial markets have on General Mills' contribution to its pension plans? E10-33. Analyzing and Interpreting Pension Disclosures General Mills Inc. reports the following pension footnote in its 10-K report. Defined Benefit Pension Plans ($ millions), Fiscal Year 2016 Change in Plan Assets Fair value at beginning of year Actual return on assets. ..... Employer contributions. Plan participant contributions .. Benefits payments ..... Foreign currency. Fair value at end of year ........ $5,758.5 36.3 23.7 ... 5.7 (2775) ....... (6.8) $5,539.9 Change in Projected Benefit Obligation Benefit obligation at beginning of year ............. $6,252.1 Service cost ........ 134.6 Interest cost ........... 267.8 Plan amendment .. 0.9 Curtailment/other..... Plan participant contributions .. 5.7 Medicare Part D reimbursements. 65.2 Benefits payments ........ (278.0) Foreign currency....... (6.9) Projected benefit obligation at end of year ............ $6,448.5 71 ....... Estimated benefit payments ... are expected to be paid from fiscal 2017-2026 as follows: Defined Benefit $ millions Pension Plans 2017. .................. $0 277.7 2018. 2879 2019. 2971 2020 .............. 306.8 2021.......... 316.4 2022-2026............... .. 1,731.5 a. Describe what is meant by service cost and interest cost. b. What is the total amount paid to retirees during fiscal 2016? What is the source of funds to make these payments to retirees? c. Compute the 2016 funded status for the company's pension plan. d. What are actuarial gains and losses? What are the plan amendment adjustments, and how do they differ from the actuarial gains and losses? e. General Mills projects payments to retirees of about $300 million per year. How is the company able to contribute only $23.7 million to its pension plan? f. What effect would a substantial decline in the financial markets have on General Mills' contribution to its pension plans
