Hi, I am a bit confused on the economic pension expense. There are 2 ways to calculate it: 1/ it corresponds to the sum of the changes in the PBO (excluding benefit paid) less the actual return on plan assets, 2/ it corresponds to the change in the funded status excluding employer contribution. Am I correct? Thankx,
I wouldn’t worry too much about the first way, it’s long and messy. Just remember this: Economic Pension Expense = Employer Contributions - change in funded status if someone other than the employer contributes to the plan as well, ignore that and do NOT include it in the calculation. Also remember this: change in funded status = (Fund Assetsend - DBOend) - (Fund Assetsbeg - DBObeg) and that’s all you need to know about that.
I second this after trying to find a 2nd way to do it to double check myself it got messy. the 2 equations are the same thing I think.
OK, Thank you for the answer and I ll try to remember that !