arca_ex2


Exhibit 2: Balance Sheet Impact of Cash Balance Conversion
The Widget Co. had a noncontributory defined benefit pension plan that covered most of its employees in the United States. Effective January 1, 1999, the company converted the plan to a noncontributory cash balance plan for all active employees. Participants were credited with an initial account balance equal to the present value of their accrued benefits under the plan in effect on December 31, 1998. Participants received pay credits equal to 5% of annual compensation and their accounts were credited with annual interest based on 30-year Treasury bond rates equal to 6% in 1999. As a result of the conversion, the company experienced a reduction of approximately $1.8 million in pension expense and a reduction in its benefits obligation of $8.6 million.

The table below illustrates the changes in the benefits obligation, funded status of the plan and pension costs as a result of the conversion from the traditional to a cash balance formula. (Amounts at December 31, 1999, under the traditional defined benefit plan formula are shaded gray and included for illustrative purposes only. Such amounts would not be presented in the disclosures required under FASB Statement no. 132.)

SPONSORED QUIZ

How well do you know small business?

There are over 30 million small businesses in the U.S., and many of them are optimistic in their outlook. Are you familiar with the obstacles and opportunities they are facing? Test your small business acumen with this quiz sponsored by Chase Ink®.

SPONSORED REPORT

In focus: Payroll

Providing payroll services that comply with ever-changing regulations and meet evolving employee and employer demands is no easy task. Paychex's Tom Hammond discusses common payroll considerations for CPA firms.