CFAI on question 16, mock exam afternoon, gives: [Change in benefit obligation + benefits paid] - [Change in plan assets - (contributions - benefits paid)]. Why is it that this equals the (Ending Funded Status-Beginning Funded Status-Employer Contributions) formula I use usually? Is this formula flawed? I’ve only heard: 1) Service Cost + Interest Cost + Plan Amendments - Actual ROPA and 2) (Ending Funded Status-Beginning Funded Status-Employer Contributions) I have never heard of an economic pension expense formula that includes benefits paid.
I believe the first one should be Service + interest - Actual ROPA no plan amendments there
Schweser Book 2 page 171: “Economic pension expense can be calculated by summing all of the changes in PBO for the period (except for benefits paid) and then subtracting the actual return on assets.” Then it gives an example on page 172 where economic pension expense=$940, which is $580 service cost + $70 interset cost + $440 plan amendment - $150 actual return on plan assets.
don’t have the FSA book handy here but I just remembered three components and remember doing one of the CFAI sample or mock exams that they don’t include any of those adjustments. Everyone corrects me if I am wrong
kevincwang Wrote: ------------------------------------------------------- > don’t have the FSA book handy here > > but I just remembered three components and > remember doing one of the CFAI sample or mock > exams that they don’t include any of those > adjustments. > > Everyone corrects me if I am wrong you are correct. in the example you are thinking of the epe could have been calculated using only three inputs and they are the three mentioned above. you could have also checked your answer by using the second method. however, epe on the first method should include the addition of Plan Amendments, there just werent any in that CFAI question. its best to learn both methods.