RSM320H1 Chapter 19A: CHAPTER 19A
Document Summary
Expected to work for 35 years: retirement date december 31, 2050 (age 65) Life expectancy at december 31, 2050 is 12 years. The pension plan: defined benefit plan, annual pension benefits on retirement. 2% of salary at retirement for each year of service, or. 2% x final salary x years of service: discount rate = 6% 2% x ,000 x 1 year of service. This annuity must be discounted to determine the cost in 2016. First discount back to the retirement date of 2050 then discount back to 2016. Pv ,000 annuity to december 31, 2050 n = 12, i = 6% The pv on dec. 31, 2016 of this lump sum at dec. 31, 2050 n= 34, i = 6% Current service cost is then calculated in same manner for each year with n adjusted accordingly. For 2017, the current service cost = ,677 (n is now = 33)
