Reference no: EM133576204

Question

Case 16-8 Frozen Ballooning Out of Control LLC ("BLOC" or the "Company") is a manufacturer of hot air balloons. Due to decreased demand for hot air balloons and challenging industry conditions, BLOC's management is exploring ways to reduce the Company's rapidly rising compensation and benefit costs. Management has determined it will either (1) amend the Company's single employer defined benefit pension plan by eliminating the future earning of pension benefits for its employees (i.e., freeze its pension plan) or (2) reduce headcount across the Company by 5%. Either option will require approval by BLOC's board of directors. If BLOC decides to freeze its current pension plan, it will not offer any new pension benefits to its employees through another plan. BLOC's current pension plan is the only retirement benefit arrangement it provides to its employees. The plan's pension benefits are based on years of service and average salary for the last five years of the employee's service period, and all employees, both hourly and salaried, who have attained six months of service are participants in the pension plan. Under the plan freeze, the Company will eliminate the accrual of additional pension benefits for future service. However, the Company will continue.