Assume that a company establishes a DB pension plan. The employee has a salary in the coming year of $50,000 and is expected to work for 3 more years before retiring. The assumed discount rate is 10%, and the assumed annual compensation increase is 4%

Current salary                                                                         $50,000

Years until retirement                                                              3

Annual compensation increases                                                          4%

Discount rate                                                                           10%

Final year’s estimated salary                                                  $50,000*(1.04)²= $54,080

Benefit                                                                                     2%

The plan will pay a lump sum pension benefit equal to 2% of the employee’s final salary for each year of service beyond the date of establishment.

Construct the pension table. Use the format below.

The Pension Table

Year	1	2	3
Estimated annual salary
Benefits attributed to:
Prior years
Current year
Total benefit
Opening Obligation
Interest (10%)
Current service cost
Closing Obligation