Hi,
I could understand that annual unit period cost is the annual contribution the employer owes. But I lost it at service cost calculation. Why are we discounting only 1 year’s cost of unit period cost?
For e.g: Consider an employee who works for 5 years. The annual unit period cost was calculated to be 902.98 with discount rate 6%. For the calculation of 1st year service charge, we have to discount 902.98 for 4 years with interest rate 6%. Shouldn’t we be discounting 4514.9 (902.98*5) for 4 years with interest rate 6%? Since 4514.9 is the total amount employer has to contribute?
Thank you!