ACC 422 Exam 2 Chapter 19 Pensions

Defined Benefit

= The employee is promised a certain amount of benefits at retirement

Defined Contribution

= Employer contributes a defined sum to a (third
party) plan trust

• similar to a 401K plan

Examples of Acturial Assumptions

1. Mortality rates

2. Employee turnover

3. Future salaries

4. Rates of return

5 Parts of Pension Cost

1. Service cost - VP of S+P

2. Interest cost - Interested in the Bengals

3. Return on plan assets - Return to my bed

4. Prior Service Cost - Prior Exec S+P

5. Gains and losses - Friend Board Gain and Lose some

New Pension Standard

“SFAS 158” (ASC 715)*

Measurements of Pension Cost

1. Service cost

2. Interest cost

3. Return on plan assets

4. Gains and losses

5. Amortization of unrecognized prior
   service cost

Service Cost

= the expense caused by the increase in PBO payable to employees because of services rendered during the
current year

• what the employee gives to the company

Interest cost