Defined benefit

Question on a practice test:

Which of the following is LEAST likely to be an input used in calculating the liability associated with a company’s defined benefit pension plan?

A

how many employees will leave the company before reaching

retirement eligibility

B

the expected return on investments that will be used to fund

the defined benefit plan

C

the salaries employees will be earning prior to their retirement

D

how long employees will live

Explanation

Defined benefit plans promise fixed payments to retirees regardless of returns earned on plan assets.

The answer is B, so they are saying the returns one expects to generate are not part of calculating the liability. Is is the case that expected returns are only a factor after the liability has been determined? Thanks in advance.

It is a defined benefit plan, so the liability is the function of employee numbers and salary, not market returns.