Hello,
In practice problem 7-12 at the end of the CFA reading (p240), question 11 asks how much the actual return is on plan assets.
The answer is Actual gain = Expected return + Actuarial gain.
Now there are 2 things that I don’t understand.
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on page 200, it says that actuarial gains/losses can arise from two sources: changes in actuarial assumptions and differences between expected and actual returns. So coming back to the question, how am I supposed to know that actuarial gain is not attributable to a change in actuarial assumptions?
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If actuarial gains/losses arise from changes in actuarial assumptions, why is there an actuarial gain under “change in plan assets”? If I change an assumption, it should affect my pension obligation, not my investment portfolio, no?
While writing all this, I came to a possible answer to my question: actuarial gains/losses on the benefit obligation side come from changes in actuarial assumptions, while those on the plan asset side come from differences in expected & actual returns. Is that correct?
Thank you for your help.