Oregon Co.'s employees are eligible for retirement with benefits at the end of the year in which both age 60 is attained and they have completed 35 years of service. The benefits provide 15 years reimbursement for health care services of $20,000 annually, beginning one year from the date of retirement. Ralph Young was hired at the beginning of 1977 by Oregon after turning age 22 and is expected to retire at the end of 2020 (age 60). The discount rate is 4%. The plan is unfunded.
The PV of an ordinary annuity of $1 where n = 15 and i = 4% is 11.11839.
The PV of $1 where n = 2 and i = 4% is 0.92456.
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With respect to Ralph, what is the service cost to be included in Oregon's 2018 postretirement benefit expense, rounded to the nearest dollar?

Question

Quizplus · Accepted Answer

The computation is as follows: $$\begin{aligned}
\text { Bernce cost } & = \text { EPBO } ( 12 / 31 / 2018 ) \times ( 1 \text { year } / \text { Attribution period } ) \
& = \$ 205,593 \times 1 \text { year } / 39 \text { years } \
& = \$ 5,272 ( \text { rounded } )
\end{aligned}$$

Oregon Co's Employees Are Eligible for Retirement with Benefits at the the End