Pension

Question 1

Prior Service Cost

Answer 1

• Cost associated with service years before the plan was implemented or amended.
• Formula: Beg. PSC/Avg. service life or expected future years-of-service.

Question 2

Interest Cost

Answer 2

• Is the increase in PBO that results from the passage of time.
• Formula: Beg. PBO X Discount rate (Settlement rate)

Question 3

Return on Plan Asset

Answer 3

Actual earning of pension plan during the period

   Beg. FV of Plan Asset
\+ Contributions
\+ Actual returns
- Benefits Paid 
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= Ending FV of plan asset

Question 4

Service Cost

Answer 4

Is the increase in PBO that results from employee services in the current period.

Question 5

Defined Benefit Plan

Answer 5

Actuary is needed to project future salaries.

Question 6

Projected Benefit Obligation

Answer 6

Uses future estimated salary in the calculation

Question 7

SIR AGE

AGE, unamortized amount goes to AOCI

Answer 7

\+   Service Cost
\+   Interest Cost
<   Return on plan asset>
\+/- Amortization of PSC 
\+/- Gain/loss on holdings 
\+/- Excess amortization of existing obligation
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= Pension Expense