Yale University Future Pension Benefits Discussion Responses


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Please provide responses to the three following discussions.100 words each Apa 7thAlexDiscount RataMost retired people in the United States live off their pension. A pension is defined as an employee benefit that commits the employer to make regular contributions to a pool of money that is set aside to fund payments made to eligible employees after they retire. Employers used discount rates to determine how much to pay into an employee’s pension. The discount rate is defined as a long-term interest rate used to fund future pension benefits. It should be noted that not all employers put into their employee’s pension. Many things can go in determining a discount rate for a pension plan. One reason some employers put into pensions is because they can use that as a tax credit. Other thing that determines the amount an employer would contribute to a pension plan are the level of an employee is within the company, there age, how long have they worked for the company, and their projected salaries. It is important to pick a good discount rate for a pension plan that best benefits the employee and matches the company policy on pension plans. It is also important to pick a safe discount rate. The Governmental Accounting Standards Board has a formula that they use to determine the future value of an asset.SeilaDiscount Rate for Pension PlanAccumulated Benefit Obligation approximates a company’s pension obligation to its employees. The accumulated benefit obligation estimates the pension plan’s future obligations based on the assumption that the pension plan will terminate immediately and does not consider future salary increases. Defined benefit pension plans relate to retirement benefits other than pension plans. Defined benefit plans for retirement benefits include insurance, health insurance, etc. These benefits are funded by the employer or managed jointly by both the employer and the retired employee contributing to insurance, medical, and legal services. Actuarial Present Value is the present value of contingent payments that a company expects to pay under its retirement benefit plan over a period of time. This is the information used in accounting to record the service as an expense. Due to pension plan changes, past service costs related to changes in employers’ pension obligations. Therefore, as a result of this change, employers must calculate the change in pension obligations earned by plan participants over the past few years, known as service cost. Employers consider plan type, legal requirements, and calculation methods when choosing the appropriate discount rate for a pension plan. The discount rate should be based on high-quality corporate bond yields, which should be calculated on the relevant measurement date rather than on average yields. Many plan sponsors  define selection criteria for discount rates that are consistent from year to year.ClayPensions and Post Retirement BenefitsChoosing a pension plan often seems confusing because several technical details are associated with them. For example, selecting a discount rate involves considering information regarding the company’s properties and external data. When setting a discount rate, an employer must consider several factors relating to their company. To calculate its discount rate correctly, each company must consider assessing its revenue potential and credit rating. A discount rate is a term in economics related to the present value of future payments, in this case, pension benefits. The current value of a pension benefit is how much it is worth today. If the worker contributes one hundred dollars and the employer contributes the same, then the current value of the pension benefit is two hundred dollars. However, that may not sound like very much, so pension funds invest their contributions from employees and employers. Those contributions can earn interest and gain value over an employee’s career. That two hundred invested today will be worth substantially more in thirty years at the end of the employee’s job. Experts predict how much that hundred will be worth in thirty years, assuming how much that money will grow over time.However, pension plans need to assume future investment earnings to assess how much they need in contributions from employees and employers in the upcoming year. The discount rate is used to allocate the cost of future benefits over time to answer the fundamental question, how much should we contribute today to hit our future funding target? It is also essential to consider the customs of the country’s economic system where the company operates. In addition, a crucial element is the inflation rate, as it directly affects the financial condition. Thus, the optimal discount rate will be higher in financially unstable companies or those located in countries with challenging business conditions. For an employer to choose a reasonable discount rate, they must adequately assess the economic environment, the company’s successes, the accurate revenue evaluations, and the business risk properties.

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