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A corridor in pension accounting is an amount equal to 10% of the absolute value of the greater of:

  • The projected benefit obligation (PBO), or
  • The value of the plan assets

The corridor may be determined using either of the following:

  • The fair value or market related value of plan assets.
  • Any systematic and rational manner of recognizing changes in market value over not more than five years.

If the gain or loss in accumulated other comprehensive income (aoci) exceeds the corridor, amortization is required. If the gain or loss in accumulated other comprehensive income is less than or equal to the corridor, no gain or loss amortization is required.

The corridor is the first step in the process of determining at the the beginning of each year whether the aforementioned gain or loss is sufficiently large to require amortization in each year.

If amortization of the gain or loss in accumulated other comprehensive income is required, the amortization is the excess of the net gain over the corridor amount, divided by the average remaining service period of active employees expected to receive benefits under the plan.

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