Accrued Benefit Cost Method
What Does Accrued Benefit Cost Method Mean?
The accrued benefit cost method is an actuarial approach used to determine the amount of money a person will receive in the future through their retirement plan. It is calculated based on their years of employment and the employee benefits accrued annually until retirement.
Insuranceopedia Explains Accrued Benefit Cost Method
Actuaries calculate an individual’s life expectancy to determine the amount of money available from their pension or retirement plan. Life expectancy also influences the age of retirement.
Each year, a specific amount is set aside based on the employee’s salary and is considered their retirement benefit for that year. This benefit is not limited to working hours or days but may also include non-working time, such as vacation breaks or sick leave. These calculations ensure a clear estimate of how much an employee can receive upon retirement.
