Settlement in Pension Plan

Discharge of all or a portion of an employer's pension benefit obligation. Any excess plan assets revert to the company. A settlement must satisfy all of the following criteria: (1) it is irrevocable; (2) it relieves responsibility for a pension benefit obligation; and (3) it eliminates significant risk applicable to the obligation. An example is giving a lump-sum payment to employees in exchange for pension rights. There is immediate recognition of the gain or loss arising from the settlement. See also Curtailment in Pension Plan; Termination in Pension Plans.