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premium plan. The master trust was amended and restated effective
January 1, 1991; the name of the master trust was changed to the
Norwest Corp. Employee Benefit Trust.
C. Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 106
From 1957 to 1991, Norwest paid medical benefits for retired
employees as claims were submitted; i.e., on a “pay-as-you-go”
basis. For financial accounting and tax purposes, Norwest
recognized these costs when the benefits were paid.
In 1990, new financial accounting rules for nonpension,
postretirement benefits were promulgated in Statement of Financial
Accounting Standards No. 106 (SFAS 106). Pursuant to SFAS 106, for
financial accounting purposes, employers must accrue (during the
employment of an employee) the cost of future health care benefits
to be paid to the employee after retirement.9 Thus, because SFAS
106 applies to a postretirement benefit plan regardless of the
means or timing of funding, the employer cannot postpone
recognition of the cost of the employee’s postretirement benefit by
contributing at the time of retirement a lump sum equal to the
9 “Attribution period” is the period of an employee’s
service to which the expected postretirement benefit obligation for
that employee is assigned. Generally, the beginning of the
attribution period is the employee’s date of hire and the end of
the attribution period is the employee’s full eligibility date. An
equal amount of the expected postretirement benefit obligation is
attributed to each year.
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