PENSION EXPENSE Clause Samples

PENSION EXPENSE. 1. The intent of this pension agreement is to: Ensure that KCPL recovers the amount of the net prepaid pension asset representing the recognition of a negative Statement of Financial Accounting Standards No. 87 (FAS 87) result used in setting rates in prior years; Ensure that the amount collected in rates is based on the FAS 87 cost using the methodology described below in item (2.b.); Ensure that, once the amount in 2.c. has been collected in rates by the KCPL, all pension cost collected in rates is contributed to the pension trust; Ensure that all amounts contributed by the KCPL to the pension trust per items (2.c.) and (2.e.) below are recoverable in rates; and Ensure that the KCPL will receive no more or less than the amount in item (2.c.) before the KCPL is required to fund the plan. 2. To accomplish these goals, the following items are agreed upon as part of this Agreement, to be applied as of the first day of the year in which the settlement is approved: (a) KCPL's FAS 87 cost, for financial reporting purposes, will differ from the method used for ratemaking purposes described in paragraph (2.b.). KCPL made a voluntary decision (not required for compliance with a Commission order) in January 2000, to amortize gains and losses under FAS 87 over a five-year period. A five-year average of the unrecognized gain/loss balance has been amortized over five years since January 2000. Any method, which recognizes gains and losses over a shorter time frame, is considered a "more preferred" method under Generally Accepted Accounting Principles ("GAAP"). Pursuant to GAAP, KCPL is precluded from changing the method of pension accounting to another method unless the change is to a more preferable method. In the case of FAS 87, a preferable method is a method that amortizes gains and losses more rapidly. The method described in paragraph (2.b.) does not amortize gains and losses more rapidly and is not considered a more preferable method. Therefore, KCPL cannot switch to that method for financial reporting. KCPL will establish a regulatory asset or liability for the annual difference in the FAS 87 result from the two different methods. KCPL's outside actuary will maintain actuarial reports under each method on an annual basis. Any difference between the two methods is merely a timing difference that will eventually be recovered, or refunded, through rates under the method used in setting rates over the life of the pension plan. No rate base recognition will be requi...