Under ASC 960, the actuarial present value of accumulated plan benefits is based on which of the following?

Under ASC 960, the actuarial present value of accumulated plan benefits is based on which of the following?

• A. Employer contributions
• B. Market value
• C. Inflation
• D. Employee earnings

Answer: (D)

The value focuses on benefits already earned under the plan. In ASC 960, the actuarial present value of accumulated plan benefits reflects the amount the plan has promised employees based on the benefit formula, which is typically tied to the employee’s compensation (earnings) and years of service. That input—how much employees have earned in relation to their earnings history—drives how large the accrued benefit is, and thus its present value today. Employer contributions, plan assets’ market value, and inflation influence other aspects (funding, asset adequacy, or discount rates) but do not set the amount of accumulated benefits. So the benefit amount is determined by employee earnings.

The value focuses on benefits already earned under the plan. In ASC 960, the actuarial present value of accumulated plan benefits reflects the amount the plan has promised employees based on the benefit formula, which is typically tied to the employee’s compensation (earnings) and years of service. That input—how much employees have earned in relation to their earnings history—drives how large the accrued benefit is, and thus its present value today. Employer contributions, plan assets’ market value, and inflation influence other aspects (funding, asset adequacy, or discount rates) but do not set the amount of accumulated benefits. So the benefit amount is determined by employee earnings.