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Defined Benefits Plans

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Please explain actuarial assumptions and give examples.

Please explain a defined benefit plan

In computing the interest component of pension expense, what interest rate may be used?

Please explain the difference between service cost and prior service cost

What is the formula for actual return on plan assets. Also, explain when does a gain or loss occurs in plan assets.

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Solution Summary

Your tutorial is 342 words and discusses the assumptions, defined benefits, service costs, prior service costs and how gains and losses occur in pension expense.

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Please explain actuarial assumptions and give examples.

Actuarial assumptions are the variables used to model expected future costs or expected future assets. Examples are rate of compensation increase, number of employees reaching the vesting period, average life of retiree.

Please explain a defined benefit plan

A defined benefit plan is a plan that promises benefits in the future, typically at retirement. My husband's defined benefit plan promises 1.1% of his highest salary level times years of service when he retires. So, he expects to get 1.1% x $55,000 (what he thinks he'll be making) x 25 years (how long he expects to work for ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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