# economic pension expense

ppl, i looked at a cfai problem and they calc economic pension expense as: Service Cost + Interest Cost + Actual Return i used the formula I know: Ending PBO - Beginning PBO + Benefits Paid - Actual Return The \$ value I get by my way of doing it isn’t even an answer choice. ideas?

can u post the problem #. I can look at it after I get home. Do not have the CFAI book with me to look.

niraj_a Wrote: ------------------------------------------------------- > ppl, > > i looked at a cfai problem and they calc economic > pension expense as: Service Cost + Interest Cost + > Actual Return > > i used the formula I know: Ending PBO - Beginning > PBO + Benefits Paid - Actual Return > > The \$ value I get by my way of doing it isn’t even > an answer choice. ideas? I don’t know your formula. The one they use is the one in the Stalla book, too. Usually you don’t start with the PBO to calculate PE. Is this because you are mixing the IS PBO and the true balance sheet PE?

Quick note: its less actual return (i.e. we subtract actual returns from the service and interests costs in order to get economic pension expense).

I think it’s adjusted PE = SC+IC-actual returns

to help you guys out - i think a littly birdy told me that this problem is in last year’s sample 1.

Econ pension exp = Change in Funded Status - Firm’s contribution. (It’s not the change in PBO.)

eltia, yes, your method and my formula both can be used to calc economic pension expense - as per schweser and an april cpk post.

Two formulae are applicable for Economic Pension expense: 1. End PBO - Beg PBO + Benefits Paid - Actual Return on Plan Assets 2. End FS - Beg FS - Employer Contributions. Both these methods should give you the same number - maybe because of the way we are calculating - signs of the amount (positive vs. negative) could be different.

^ this is Economic Pension Expense. I was talking about (last year’s concept) called Adjusted Pension expense, which was SC + IC - ARPA. If I remember correctly now. EPE is indeed the 2 formulas stated above by CP.

I thought Adjusted Pension Expense = Economic Pension Expense?

yes it has been changed. Last year it was SC + IC - actual pension expense.

niraj_a Wrote: ------------------------------------------------------- > ppl, > > i looked at a cfai problem and they calc economic > pension expense as: Service Cost + Interest Cost + > Actual Return > > i used the formula I know: Ending PBO - Beginning > PBO + Benefits Paid - Actual Return > > The \$ value I get by my way of doing it isn’t even > an answer choice. ideas? Change in PBO + Benefits Paid - (Change in plan assets + Benefits Paid - Employer contributions)

ive got it down in my notes as (this is from schweser): current service cost + interest cost + plan ammendments - actual return on assets OR Beginning funded status - ended funded status - contributions

nvm, im gonna chuck this older question. our formulas seem to be right. sorry for the unnecessary brain f*ck. i had to go through it too.

the show NY Wrote: ------------------------------------------------------- > ive got it down in my notes as (this is from > schweser): > > > current service cost + interest cost + plan > ammendments - actual return on assets > > OR > > Beginning funded status - ended funded status - > contributions What includes in plan ammendment?

paid benefits or things like change in return / age etc. estimates

yo niraj, if possible can you please write down the formula or elaborate this

cpk123 Wrote: ------------------------------------------------------- > Two formulae are applicable for Economic Pension > expense: > > 1. End PBO - Beg PBO + Benefits Paid - Actual > Return on Plan Assets > > 2. End FS - Beg FS - Employer Contributions. > > Both these methods should give you the same number > - maybe because of the way we are calculating - > signs of the amount (positive vs. negative) could > be different. the first formula cpk mentions is what i have. from what i know, they will provide us with the \$\$ amount of benefits paid or plan amendments in the PBO / Plan Asset reconciliation amendment. HTH/

pensions are one of the most difficult topics in the whole course for me to grasp. its hard for me to actually udnerstand whats going on and what all the components of the formulas mean and i think i am going to have to spend some time actually understanding the formulas. does anyone have any good notes they can share that can help with this topic?