The projected benefit obligation was $340 million at the beginning of the year a
ID: 2579490 • Letter: T
Question
The projected benefit obligation was $340 million at the beginning of the year and $345 million at the end of the year. Service cost for the year was $19 million. At the end of the year, pension benefits paid by the trustee were $15 million. The actuary’s discount rate was 5%. At the end of the year, the actuary revised the estimate of the percentage rate of increase in compensation levels in upcoming years.
What was the amount of the gain or loss the estimate change caused? (Enter your answer in millions.)
What was the amount of the gain or loss the estimate change caused? (Enter your answer in millions.)
Explanation / Answer
Solution: Gain $ 16 million Working Notes: $ in million Beginning of the year PBO 340 Add: Service cost 19 Add: Interest cost 17 [ 5% x 340 ] Loss or (gain) on PBO -16 (balancing figure) Less: Retiree benefits(paid by trustee) 15 End of the year PBO 345 Gain=340+19+17-15-345 = 16 million Gain is shown negative in calculation statement. Please feel free to ask if anything about above solution in comment section of the question.
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