What is the difference between the total periodic pension cost and the conventional periodic pension cost
For total periodic pension cost, why does the total periodic pension cost increase by the amount of employer contributions? It makes more logical sense that employer payments would decrease the total periodic pension cost outstanding
Then how come in periodic pension expense is calculated off expected return (and then adjusted for actual return within actuarial gains/losses, while the total periodic pension cost is just calculated off of actual return?
Because someone a long time ago decided that firms should be allowed to smooth their pension expense by estimating the return (at the same level each year) rather than having volatile pension expenses (by having to use the actual return, which will likely vary from year to year).
The cost is the cost; it doesn’t change because you estimate the return on plan assets. The only thing that changes is what portion goes through the income statement and what portion bypasses the income statement.