Defined Benefit Pension Plan
Defined Benefit Pension Plan means a pension plan in which the benefits to be paid or the basis for determining such benefits are established in advance and the contributions are intended to provide the stated benefits.
There are 3 different types of plans. They are:
1. Qualified Defined Benefit Plan,
2. Non-Qualified Defined Benefit Plan, and
A Qualified Defined Benefit Plan is one in which meets the requirements of ERISA and the IRS requirements for a deduction of costs.
The section below relates to the requirements for a Qualified Defined Benefit Plan. For other plans see the links.
Components of Pension Costs for Defined Benefit Plans
(Except Pay-as-You-Go) are:
1. The normal cost for the period
2. A part of any unfunded actuarial liability
3. An interest equivalent on the unamortized portion of any unfunded actuarial liability, and
4. An adjustment for any actuarial gains and losses
Measurement of Pension Costs
1. The amount of pension costs expensed to a cost accounting period shall be determined by use of an immediate-gain actuarial cost method.
2. Each actuarial assumption used to measure pension cost shall be separately identified and shall represent the contractor's best estimates of anticipated experience under the plan, taking into account past experience and reasonable expectations. The validity of each assumption used shall be evaluated solely with respect to that assumption. Actuarial assumptions used in calculating the amount of an unfunded actuarial liability shall be the same as those used for other components of pension cost.
