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Since the release of this Order, we   Yhave received several inquiries requesting guidance as to what Part 32 accounts should be used   to record postretirement benefits accounted for under SFAS-106. The purpose of this letter is   ,to provide the requested guidance with respect to accounting for postretirement benefits under   YSFAS-106 in Part 32 and to address other implementation issues which we believe will surface as more carriers begin adopting this methodology.  The following Part 32 accounts shall be used to record the effects of SFAS-106 on carrier regulatory books of account.  0Account 4310, Other long-term liabilities. This account shall be used to record the   -amounts accrued for postretirement benefits. Companies shall credit this account for the net   periodic cost of postretirement benefits recorded in the expense account matrix for the current   year and shall debit this account for any fund payments made during the current year. Net   -periodic cost includes service cost, interest cost, return on plan assets, amortization of prior  Y-  service cost, gains and losses, and amortization of the transition obligation.N xP-  ԍThe transition obligation is the carrier's unfunded liability for benefits earned in the past as of the date   SFAS-106 is implemented. SFAS-106 defines the transition obligation as "the unrecognized amount, as of the date   this Statement is initially applied, of (a) the accumulated postretirement benefit obligation in excess of (b) the fair   value of plan assets plus any recognized accrued postretirement benefit cost or less any recognized prepaid postretirement benefit cost."N If fund payments   ,would cause the postretirement benefits portion of Account 4310 to have a debit balance, then   the debit balance applicable to postretirement benefits shall be reported in Account 1410, Other noncurrent  $:Z a $:Z ssets.   Account 5999(f), Expense matrix. The benefits portion of the expense matrix shall be   used to record the current year's net periodic cost of postretirement benefits in the Part 32   Zexpense accounts. Prior to adopting SFAS-106, carriers shall continue to use Account 6728,   wOther general and  $:Z a $:Z dministrative, for recording direct payments made to or on behalf of retired employees. " ,**UU#"Ԍ jԙAccount 1410, Other Noncurrent Assets. This account shall be used to record the amount of any prepaid postretirement benefit cost.  jAmortization period for transition obligation. One of the implementation issues raised by   the December 26 Order concerns the amortization period for the transition obligation. That order   icould be interpreted to require carriers to amortize the transition obligation over a period of   twenty years. This was not the Bureau's intent in authorizing carriers to adopt SFAS-106.   kCarriers should use the period(s) set forth in paragraphs 112 and 113 of SFAS-106 for   amortizing the transition obligation for regulatory accounting purposes. In most cases, SFAS-106   Kwill require that the transition obligation shall be amortized on a straightline basis over the   average remaining service period of active plan participants, except that if this period is less than   twenty years, the employer may elect to use a twentyyear period. Thus, if the average   Jremaining service period is less than twenty years, the carrier can use either its average service   period or twenty years. If the average service period is greater than twenty years, the carrier   would use its average service period for amortizing the transition obligation. Paragraph 112 also   requires accelerated amortization of the transition obligation when, after adopting SFAS-106,   cumulative benefit payments exceed cumulative postretirement benefit cost accruals. In this situation $:Z , $:Z  carriers must accelerate the amortization of the transition obligation.  \Implementation for small companies. Small companies having less than 500 employees   are not required by the FASB to adopt SFAS-106 until fiscal years beginning after December   15, 1994. The intent of the Bureau's Order was not to require small carriers to implement SFAS-106 two years earlier than they will be required to do so by the FASB.  Notification. The Bureau's Order did not state when carriers should notify the   Commission in the event they implement SFAS-106 or specify the contents of the notification.   We are requiring that written notice should be provided within thirty days of when a carrier   adopts SFAS-106 for regulatory accounting purposes. This notice shall provide us with the   interstate revenue requirement impact for the current year and a projection for the next three   years. An example of the format to be used in making this revenue requirement filing is attached.  Rate base treatment. Several carriers have raised the issue of whether the postretirement   amounts recorded in Accounts 4310 and 1410 should be reflected in the interstate rate base. It   is our opinion that postretirement benefits are similar to pension expenses recorded in Accounts   j4310 and 1410 and, as such $:Z , $:Z  should be given the same rate base treatment. Therefore, the   interstate portion of unfunded accrued postretirement benefits recorded in Account 4310 should   Ybe deducted from the rate base and the interstate portion of any prepaid postretirement benefits recorded in Account 1410 should be added to the rate base. "',C)C)UU +"Ԍ ԙThis letter is issued pursuant to authority delegated under Section 0.291 of the   xCommission's Rules, 47 C.F.R.  0.291. Applications for review under Section 1.115 of the   ;Commission's Rules, 47 C.F.R.  1.115, must be filed within 30 days of the date of this letter. See 47 C.F.R.  1.4(b)(2). ` `  hh,VSincerely, ` `  hh,VKenneth P. Moran ` `  hh,VChief, Accounting and Audits Division ",C)C)UUp"  Y-8 ATTACHMENT ă  Y-B  POSTRETIREMENT BENEFITS OTHER THAN - PENSIONS INTERSTATE REVENUE REQUIREMENT STUDY ANNUAL INCREMENTAL  $:Z   $:Z IMPACT OF SFAS 106  X -l $:Z U $:Z B(in Millions) ă  Y-` `  hh,1993V1994pp1995  xx-1996 1. Total SFAS No. 106 Accrual 2. Pay-As-You Go Amounts 3. Existing Trust Contributions 4. Total Current Accounting 5. Incremental Expense 6. Incremental Rate Base Impact 7. Incremental Revenue Requirement