Chapter 19: Accounting for Pensions and Postretirement Benefits

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Welcome back to the Deep Dive.

We're here to cut through the noise, help you get truly well informed.

Today, I want you to just take a moment and think about your own retirement.

Do you feel secure?

You know, about having enough money to live comfortably.

It's a pretty widespread concern and, well, for a good reason.

There was a survey back in 2021.

It found only about 53 % of non -retirees expected to live comfortably in retirement, which surprisingly was actually a slight improvement from the recession lows.

So for this deep dive, we're stepping into the, let's say, complex world of pensions and post -retirement benefits.

Specifically, we're going to try and uncover how companies actually account for these, these huge promises they make to their employees.

It might seem like really dense accounting stuff, but honestly, understanding it is absolutely crucial for assessing a company's true financial health, our mission today.

To kind of distill the key concepts, the principles, the standards behind these benefits, we want to emphasize their practical application in financial reporting and how you can use this knowledge to be a more insightful observer of corporate finance.

Okay, let's unpack this then.

What exactly are pensions and post -retirement benefits and why should you, as someone trying to stay informed, even care?

Well, at their core, these are forms of deferred compensation.

That's the technical term.

Think of it like this.

An employer sets aside funds today that will be paid out to you, the employee, after you retire.

Pensions, they typically cover income, right?

While post -retirement benefits, often called OPEBs, other post -employment benefits, they're usually for things like health care, dental, vision care, that sort of thing, once you've stopped working.

And there's also a pretty big incentive for both sides involved.

Employers get tax deductions for their contributions, usually, and the funds, well, they typically grow tax -free for employees until they actually retire.

So why is understanding these benefits so important when you're, say, looking at a company's financial statements?

Because these promises are, from an accounting perspective, they're enormous liabilities.

Companies aren't just, you know, sending a check and being done with it.

They have to record a pension expense as employees actually earn those future benefits.

It's a really long -term, significant obligation.

And what's fascinating here is just this sheer scale of these obligations.

I mean, when you dive into the financials of major companies, these numbers are just staggering.

Take General Motors, for instance.

They reported an $87 .275 billion pension obligation.

That's billion with a B.

Wow.

Billions.

Yeah.

And they're not alone.

You look at companies like Merck, Deere & Company, Hewlett -Packard, Molson Coors.

They all carry these massive pension obligations on their books.

And the expense itself, it could be a huge percentage of a company's pre -tax income.

We've even seen cases like GM reporting pension income in one period, while Hewlett -Packard had over 10 % of its pre -tax income tied up just in pension expense.

It varies a lot.

Okay.

So if we connect this to the bigger picture, for investors, for creditors, this information is absolutely vital.

You really need to understand these commitments to truly assess a company's financial position, its operating results, and importantly, its future cash flow needs.

Take GM again.

Its plan was about 86 % funded at one point.

Meaning?

Meaning its plan assets were less than its pension liability.

There was a gap.

So for you, the investor, knowing that means the company has a hole to fill, essentially.

You'd want to understand how they planned to close that gap because it directly affects their future cash requirements and their overall financial health.

It's a powerful indicator, really, of long -term stability.

That makes sense.

And that brings us to the two main types of pension plans.

You've got defined contribution versus defined benefit.

Historically, we've seen a pretty big shift away from those traditional defined benefit plans, haven't we?

Especially in the private sector.

Yes, that's true.

But it is important to clarify they're far from gone.

I mean, we're still talking about nearly 33 million employees participating in defined benefit plans.

And there are trillions, literally trillions of dollars in assets still held within them.

So they're still very relevant.

Okay, trillions.

So let's start with the simpler one then.

Define contribution plans.

Why are they simpler?

Well, here, the employer agrees to contribute a defined sum each period.

Maybe it's a percentage of your salary or perhaps a matching contribution to your 401k, that kind of thing.

Once the employer makes that contribution, their obligation is met.

It's done, finished.

And this means the employee bears the investment risk.

If your 401k investments take a nosedive, that's your risk, unfortunately.

From the company side, the accounting is pretty straightforward.

The annual cost or the pension expense is basically just the amount they contributed that year.

They just record the expense, reduce their cash.

A liability really pops up if they promise to contribute but don't actually send the money over by year end.

Right.

Define benefit plans, though.

That's where the accounting complexity really ramps up.

Instead of defining the contribution, these plans outline the benefits employees will receive in retirement.

It's often a function of things like their years of service and their final compensation levels.

So the promise is different.

Exactly.

And the crucial difference is that the employer bears the risk here.

They're the ones on hook to pay those promised benefits, regardless of how the plans investments perform.

And because these promised benefits are tied to all sorts of uncertain future variables, like how long employees will live, what their final salaries will actually be, or what interest rates are going to do over decades,

the accounting gets incredibly intricate.

The expense they recognize each period is definitely not just the cash they happen to contribute that year.

Okay.

So much more involved.

Much more.

And this is precisely where actuaries come in.

These are specialized professionals, highly trained, who make these educated predictions called actuarial assumptions about all those future events.

The forecasting mortality rates, employee turnover, interest rates, future salary increases, all sorts of complex things.

Companies rely heavily on these actuaries to calculate their future obligations and their current costs.

So the accounting for defined benefit plans is heavily, heavily dependent on these sophisticated financial models and

given all that complexity, let's talk about how companies actually measure that huge pension liability and the related expense.

You mentioned actuaries making assumptions.

How does that translate into a number?

Well, accounts look at a few ways to measure the liability, but the let's call it the gold standard.

The one favored by accounting rule -setters like the FASB in the US is the projected benefit obligation or PBO.

What's crucial about the PBO is that it uses projected future salaries.

This gives you, the investor or analyst, a much more realistic, sort of going concern view of the employer's true promise.

It captures the full scope of that future commitment, assuming the company keeps operating and salaries keep rising.

And I imagine those assumptions are sensitive.

Extremely sensitive.

Small changes can have a huge impact.

For example, just a 1 % decrease in the discount rate, that's the interest rate used to bring all those future promises back to today's value.

That alone can increase pension liabilities by maybe 10, even 15%.

Wow, 15 % just from a 1 % change.

Yeah, imagine the financial swing that creates on the balance sheet.

So, speaking of the balance sheet, what does this all mean for what you actually see there?

Well, companies have to recognize the net pension asset or liability.

It's pretty simple conceptually.

It's just the difference between that projected benefit obligation, the PBO, and the fair value the investment set aside to pay the benefits.

If the PBO is larger than the assets, the plan is underfunded and it's reported as a liability.

Makes sense.

If the assets actually exceed the PBO, it's overfunded and it's shown as an asset.

Think of a simple example, like Coke or company.

If their PBO was, say, $300 ,000 and their plan assets were only $210 ,000, they'd report a $90 ,000 pension liability right there on their balance sheet.

It directly hits their stated financial health.

Right.

And if we connect this to the bigger picture, you can really see these clans are like a roller coaster.

The funded status of defined benefit plans for large companies, like those in the S &P 1500, it has fluctuated wildly over the years.

We've seen them swing from lows around maybe 70 % funded right after a crisis up to highs over 90 % in better times.

What drives that volatility mainly?

It's primarily driven by changes in interest rates.

Low rates increase the liability significantly because of that discounting effect we mentioned.

And unexpected investment returns, both good and bad, play a huge role too.

Plus, actuary sometimes revise their estimates for things like mortality rates, people living longer, which can further increase the PBO.

It's just a very dynamic and challenging area for companies to manage and report.

And it shows up plain as day on their balance sheets.

Okay.

So let's dig into the expense side then.

You mentioned it's not just the cash paid out.

Correct.

There are five key components that make up the annual pension expense.

It's a bit of a formula.

First, you have service cost.

This is basically the increase in the projected benefit obligation because employees provided service this year.

Actuaries calculate this as the present value of the new benefits employees earn for their current work, and it's based on their projected future salaries.

So it's the cost of this year's promise.

Exactly.

It's a crucial component because it reflects the cost of benefits tied to current employee effort.

Second is interest on the liability.

Since the pension obligation is a long -term liability, it accrues interest over time, just like any debt would.

This is calculated by taking the PBO at the beginning of the year and multiplying it by something called the settlement rate.

Settlement rate.

Yeah, think of the settlement rate as the interest rate a company would theoretically have to pay if it borrowed money today to effectively pay off all its pension promises right now.

It reflects current market interest rates for long -term debt.

Got it.

Okay, what's third?

Third, there's the expected return on planned assets.

Remember those investments the company holds to fund the pension?

Well, a positive return on these assets actually decreases the overall pension expense recorded on the income statement because the fund itself is earning money that helps cover the future benefits.

Now, companies typically use an expected return in this calculation, not the actual return for the year.

This is done to smooth out the inevitable year -to -year volatility in actual market performance.

Smoothing.

We'll probably come back to that.

We will.

We need to talk about what happens with those unexpected differences, the gains or losses,

compared to the expected return.

That's component number four, but let's pause there for a second.

Okay.

Managing all this complex information, companies must have tools, right?

You mentioned spreadsheets.

They do.

They often use what's called a pension worksheet.

It's not a formal accounting record that gets posted into the general ledger.

It's more of a conceptual working tool.

Imagine a giant spreadsheet where they track everything related to the projected benefit obligation, the planned assets, all the components of expense.

The OCI items we'll get to, other comprehensive income.

We'll explain that.

But the worksheet really helps them organize all the data and simplify the calculations needed to prepare the actual journal entries and the financial statements.

It's kind of their behind the scenes calculation engine.

Makes sense.

All right.

Now, here's where I think it gets really interesting.

The idea of prior service cost or PSC.

What's that about?

This comes into play when a company decides to be, let's say, extra generous and amends its pension plan.

They might grant additional benefits for employee service that was provided before the amendment date.

Picture a company saying,

hey, we're going to boost the pension benefits for all the past years of service for our current employees.

That sounds like it would immediately and significantly increase the projected benefit obligation rate.

Absolutely.

It creates a big jump in the PBO.

But from an accounting perspective, this big retroactive cost isn't just dumped into expense immediately.

That would cause a huge hit to income.

So what happens instead?

Instead, the employer initially records his prior service cost, not in the income statement, but as an adjustment to other comprehensive income or OCI.

Okay, there's that OCI again.

Explain that pocket idea.

Think of OCI as a separate section within stockholders' equity on the balance sheet.

Certain types of gains and losses, like those from some pension adjustments or, say, foreign currency translations, go into this OCI pocket first.

They affect overall equity, but they bypass the main net income calculation for the period.

So it's recorded, but not as an immediate expense.

Exactly.

Then this prior service cost sitting in OCI is amortized.

That means it's gradually recognized bit by bit into the regular pension expense calculation over the remaining service lives of the employees who are expected to benefit from that plan change.

Ah, so it's spread out.

It's spread out.

It's another smoothing mechanism, essentially, spreading that large one -time benefit improvement cost over the period the employees will actually still be working and theoretically providing value.

Okay.

And that smoothing idea connects to the broader issue of gains and losses, right?

You mentioned the difference between expected and actual returns.

Precisely.

Unexpected swings in pension calculations can occur for two main reasons.

First, the actual return on plan investments might differ significantly from the expected return the company used in its expense calculation.

Markets go up, markets go down unexpectedly.

Second, the actuaries might revise their assumptions.

Maybe people are living longer than previously thought or salary growth is projected differently.

These changes also create gains or losses by changing the projected benefit obligation itself.

And if these were recognized immediately?

If these gains or losses were fully recognized in net income right away, pension expense could fluctuate wildly from year to year.

It would create a very noisy, potentially misleading income statement.

So more smoothing.

To damp down that volatility, accounting rules specifically under GAP allow companies to record these unexpected differences, these gains and losses, directly in that other comprehensive income GL pocket rather than hitting net income immediately.

Both asset gains losses from returns and liability gains losses from assumption changes can go into OCI first.

Okay, so they go into OCI.

Do they just stay there forever?

Not necessarily under GAP.

This leads us to the rather famous or infamous corridor amortization rule.

The corridor sounds intriguing.

It is a bit strange.

Yeah.

Here's how it works.

Roughly, companies track the accumulated balance of these unrecognized gains and losses sitting in OCI.

If that accumulated balance gets too large specifically, if it exceeds a certain buffer zone or corridor, then the excess amount must be amortized or gradually recognized into pension expense over time, usually over the average remaining service life of employees.

What defines too large?

What's the corridor?

The corridor is typically defined as 10 % of the larger of the projected benefit obligation or the market related value of plan assets at the beginning of the year.

If your accumulated OCI gain or loss balance breaches that 10 % threshold, you amortize the excess.

That seems complex and maybe a bit arbitrary.

It does raise an important question.

Why is this corridor allowed?

And what are some companies doing differently now?

The rationale for the corridor was that these gains and losses might just be temporary noise, likely to offset each other over the long run.

So why clutter the income statement with them immediately?

But has that thinking changed?

It has.

For some major players, we see a real world shift.

Big companies like AT &T, Verizon, Honeywell, Ford, UPS, Coca -Cola,

they've voluntarily moved away from this corridor approach.

They're adopting immediate recognition, sometimes called mark to market, accounting for these gains and losses.

They recognize them directly in net income in the year they occur.

Why would they choose more volatility?

They argue it provides more transparency, it gives users a clearer, albeit potentially more volatile, picture of their true financial performance each period, reflecting the actual economic events happening with their pension plan right away.

No smoothing, no delays.

Interesting.

So pulling this all together, what does the final picture look like when you actually open up a company's financial statements?

Let's start with the balance sheet.

Okay.

On the balance sheet, it's relatively straightforward now.

Companies report the net overfunded or underfunded status as a single line item, either a pension asset, if overfunded, or pension liability, if underfunded.

Just one number summarizing the net position.

Yes, one net number reflecting the difference between the PBO and the fair value of plan assets.

This tells you instantly if the company at that moment has enough set aside according to the accounting rules, or if it have a shortfall it needs to worry about.

And on the income statement, you mentioned the components.

Right.

On the income statement, there's generally a bit of a split in presentation.

The service cost component of pension expense, the cost related to current employee work that's typically reported right up there with other operating expenses, often grouped with salaries and wages or compensation expense.

Because it relates to current operations.

Exactly.

It's seen as part of the cost of employing people today.

The other components that includes the interest cost, the expected return on assets, the amortization of prior service cost, and that corridor amortization of gains losses, if they use it, those are generally bundled together and reported as a single net amount.

You'll often find this net amount lower down in the income statement, maybe in a section called other income expense or other expenses and losses.

Why this split?

This separation is important because, as we said, service cost relates directly to current employee work and current operations.

It arguably has different predictive value for future performance than the other components, which are more related to financing aspects, past decisions like granting PSE and market fluctuations.

It gives you the user a potentially cleaner view of their core operating performance versus the financing and legacy costs of the pension plan.

Okay.

And then there's comprehensive income, those OCI items.

Right.

We need to circle back to that.

Remember those actuarial gains and losses and the prior service costs that initially went into other comprehensive income?

OCR.

Bypassing net income initially.

Correct.

They are first recognized in the statement of comprehensive income, capturing their impact on the company's overall financial position and equity for the period, even if they don't hit the bottom line net income right away.

These OCI items then accumulate over time in a special section of stockholders' equity balance sheet.

This section is called Accumulated Other Comprehensive Income, or AOCI.

So while they don't always hit net income immediately under GAAP, their effect on the company's overall financial health, its total equity, is still transparently reported.

That's the idea.

It's all disclosed, just in slightly different places, depending on the nature of the item and the accounting rules being followed.

And speaking of disclosure, the notes must be pretty detailed.

Oh, absolutely.

The notes to the financial statements for pension plans are incredibly extensive, and really for good reason.

Full disclosure is paramount here, given the complexity and magnitude of these obligations.

These notes provide a real wealth of information.

You'll find things like a detailed breakdown of all the pension expense components we discussed.

You'll see a reconciliation, showing how the projected benefit obligation and the plan assets changed from the beginning of the year to the end.

They have to disclose the critical interest rates, the discount rate, the expected return rate, and other key actuarial assumptions used.

Like mortality assumptions.

Yes, things like that.

They also have to show how the plan assets are allocated across different investment categories, stocks, bonds, real estate, etc.

And they usually provide estimates of expected future benefit payments for the next several years.

So if we connect this back to the bigger picture, why are these notes so critical?

Well, these detailed notes are absolutely critical for you, the informed user, to really evaluate the plan's underlying market risk, the potential future cash flow demands on the company, and crucially, the reasonableness of the company's own assumptions.

They help you truly understand the hidden commitments and the potential volatility lurking beneath that single net number on the balance sheet.

Got it.

Okay, now let's briefly touch on some special issues, and maybe those other post -retirement benefits you mentioned.

What about regulations?

Right.

A key piece of regulation in the U .S.

is the Employee Retirement Income Security Act of 1974, usually just called ERISA.

This was landmark legislation passed primarily to safeguard employee pension rights.

It established things like minimum funding requirements for defined benefit plans and fiduciary duties for plan managers.

ERISA also created the Pension Benefit Guarantee Corporation, the PBGC.

The PBGC?

What's their role?

Their role is essentially to act as an insurance agency for defined benefit plans.

They step in and take over plans that are terminated, usually because a sponsoring company goes bankrupt, and they guarantee payment of basic pension benefits up to certain limits.

They can even impose liens on an employer's assets if there are unfunded liabilities when a plan terminates.

So, a safety net, but...

But the PBGC itself has faced its own financial challenges, running significant deficits at times.

This just adds another layer of complexity and potential risk to the whole pension landscape, especially for multi -employer plans in certain industries.

And what about companies deliberately ending their plans?

You hear about that sometimes?

Yes.

That's the practice of pension terminations, sometimes called asset reversions.

This typically happens when a company finds its defined benefit plan is significantly overfunded.

The assets are worth much more than the PBO.

They might decide to terminate the plan to basically recapture those excess assets.

Companies like Occidental Petroleum, maybe Stroh's Brewery way back, Avaya more recently, they've done this.

How does that work?

They just take the money.

Well, first, they have to fully settle their obligations to the plan participants.

This often involves giving retirees lump sum payments or purchasing annuities from insurance companies to cover the promised benefits.

Once the obligation is fully settled and legally extinguished, if there are still excess assets remaining in the plan, the company might be able to take those funds back onto its own balance sheet for other corporate purposes.

It's a way for a company to effectively de -risk its balance sheet by getting rid of the pension obligation and maybe get some cash back too.

And the accounting follows that settlement?

Yes.

From an accounting perspective, any gain or loss resulting from settling the obligation comparing the settlement cost to the carrying value of the liability is recognized in income at the time of settlement.

Interesting.

That sounds like part of a bigger trend of de -risking.

Exactly.

And that leads us nicely into the analytics and action aspect of pension strategy.

Companies are constantly evaluating ways to reduce the risk associated with these large, volatile defined benefit liabilities.

We mentioned annuity buyouts, that's a big one.

FedEx, for example, transferred billions, I think it was around $6 billion,

in pension obligations to MetLife through an annuity purchase.

So they paid MetLife a lump sum.

And MetLife took over the responsibility for paying those retirees.

FedEx effectively handed over the risk, the investment risk, the longevity risk to the insurance company.

It cost them upfront, but it removed a huge liability from their books.

What about lump sum payouts?

That's another common strategy.

Companies might offer current or former employees the option to take their pension benefit as a one -time lump sum now instead of receiving monthly payments in retirement.

Why would employees take that?

Well, it gives them control over the money.

Maybe they have other plans for it.

But what's fascinating is the analytics involved for the company.

They use predictive models to estimate how many participants are likely to accept a lump sum offer versus sticking with the annuity.

They analyze how different discount rates affect the calculation of that lump sum value.

These are complex, data -driven decisions, all aimed at simplifying their future obligations and offloading significant long -term financial risk.

Okay.

Now, beyond these traditional pensions, you mentioned companies often provide other crucial benefits after retirement.

Let's briefly dive into those.

OPEBs, right.

Right.

Post -retirement benefits other than pensions or OPEBs.

This typically covers things like healthcare, prescription drugs, maybe life insurance, dental, vision those welfare type benefits provided after an employee retires.

And the accounting is similar to pensions.

The core concepts are very similar, yes.

It's still a form of deferred compensation earned by employees while they work to be paid out later.

So the basic accounting principle is accrual, recognizing the cost over the employee's service period, not just when the benefits are paid.

The accounting rules largely follow a parallel path to pensions.

But are there key differences?

It feels like healthcare costs are less predictable than a pension formula.

Absolutely.

There's some very key differences that make these OPEB plans, especially healthcare, particularly challenging to account for.

First, unlike many pension plans, most retirement healthcare benefits are generally not pre -funded by employers.

There aren't usually the same tax deductions available for pre -funding future healthcare costs as there are for pensions.

So companies typically pay these benefits out of pocket as they come due pay as you go.

Okay, so no big pot of assets usually.

Not usually, no.

Second, the benefit definition itself is often uncapped and highly variable.

Think about healthcare costs.

They can fluctuate wildly depending on inflation, medical advancements, usage patterns.

It's much harder to predict than a defined pension amount based on salary and service years.

Much harder.

And the magnitude can still be enormous.

We saw numbers earlier.

GM at one point had $6 .6 billion in these OPEB obligations.

AT &T $13 .9 billion, Verizon $16 .1 billion.

These are significant liabilities.

Wow, so similar accounting framework, but less funding and way more uncertainty.

That's a good summary.

The overall accounting mechanics like calculating obligations, sometimes called the EPBO or APBO for these benefits, and recognizing expense components using worksheets.

Even the corridor approach for gains and losses under JAP.

It all mirrors pension counting quite closely.

And the disclosures in the notes are similarly extensive, reflecting that uncertainty.

One last big comparison point then.

How does all of this stack up on the global stage?

You mentioned GAAP with U .S.

rules.

What about IFRS, the International Financial Reporting Standards used by many other countries?

That's a really important question, especially for anyone looking at multinational companies.

There are definitely similarities between U .S.

GAAP and IFRS when it comes to pensions and OPEBs.

Both systems distinguish between defined contribution and defined benefit plans.

And the accounting for defined contribution plans is pretty much the same expense equals contribution.

Both IFRS and GAAP also require companies to recognize the net pension asset or liability that funded status right on the balance sheet.

So that core recognition principle is aligned.

Okay, so similar basics.

What are the key differences then?

There are a few crucial differences that can really impact how you interpret the financial statements.

Let's highlight two big ones.

First, prior service cost, PSE.

Remember when a company grants retroactive benefits?

Under IFRS, that cost is recognized immediately in pension expense in the period the plan is amended.

Immediately, wow.

Immediately hits profit or loss.

This can lead to a much more volatile income statement under IFRS compared to GAAP, where, as we discussed, that cost is put into OCI first and then amortized into expense gradually over time.

Okay, that's a big difference in timing and volatility.

What's the second one?

The second major difference is the treatment of those actuarial gains and losses, the ones arising from changes in assumptions or unexpected asset returns.

Under IFRS, these gains and losses are also recognized in other comprehensive income, OCI, similar to GAAP's initial step.

However, crucially,

IFRS does not allow these amounts to be recycled or amortized into net income in subsequent periods.

Never.

Never.

Once they hit OCI under IFRS, they stay effectively locked with inequity.

There's no corridor mechanism to bring them back into the profit and loss calculation later.

Whereas GAAP?

Whereas GAAP, as we covered, recognizes them in OCI and then typically amortizes them into net income over time, often using that corridor approach.

Or companies can elect immediate recognition in net income under GAAP too, like those firms we mentioned.

So under IFRS, those swings stay out of net income permanently while under GAAP, they can eventually trickle in via amortization unless a company chooses mark -to -market.

Exactly.

That's a fundamental difference in how income smoothing is handled between the two sets of standards.

Oh, and one other point.

IFRS generally uses one combined standard for pensions and other post -retirement benefits, while GAAP has historically had separate standards, though the principles are converging.

Fascinating.

Those IFRS GAAP differences are really key for anyone comparing companies globally.

Okay, so to try and wrap this up.

Accounting for pensions and these other post -retirement benefits is, while it's clearly a complex but absolutely vital area of financial accounting, understanding how these massive long -term commitments are measured, recognized on the statements, and disclosed in the notes, it really does provide deep, deep insight into a company's true financial health and future obligations.

Hopefully this deep dive has equipped you with some better tools to critically assess the financial reporting of companies grappling with these significant plans.

And maybe that leads us to a final provocative thought for you to consider as you look at all this.

Given the clear, ongoing shift away from employer risk -defined benefit plans towards employer risk -defined contribution plans, and given all the inherent complexities, the assumptions, the volatility we've discussed in accounting for these long -term obligations, what responsibility do you, as an individual, truly bear for securing your own retirement planning?

And perhaps more pointedly, how transparent is corporate financial reporting, really, in helping you assess these critical life decisions, both for yourself and for the companies you might invest in or work for?

That is a great question to ponder.

A lot rests on understanding this, doesn't it?

Well, thank you for joining us on this particular deep dive.

As always, we encourage you to keep exploring, keep asking questions, and definitely stay curious.