Othello Steel Provides a Defined Benefit Pension Plan for Its

question 83

Essay

Othello Steel provides a defined benefit pension plan for its employees.One of its employees,Ginger Philips,who just turned 45 years old,expects to retire at age 70.At that time,the pension plan will pay Ginger annual pension payments equal to 10% of her final year's salary for each year of services rendered by Gail.The pension payments will continue until Gail's death,which actuaries expect to be when she turns 95 years old.Ginger is currently earning $75,000 per year,and this rate is not expected to increase due to the poor state of the steel industry.Orion Steel uses a 6 % interest rate for its pension obligations.
Requirement:
Determine the current service cost for Ginger Philips's pension for the past year (the year just before she turned 45).

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Definitions:

Normal Good

A type of good for which demand increases when income increases, demonstrating a direct relationship between income and demand.

Consumer Incomes

The total earnings received by consumers, including wages, dividends, and other sources of income.

Demand Curve

A graphical representation showing the quantity of a product that consumers are willing and able to purchase at various prices.

Digital Cameras

Electronic devices that capture and store photographs in digital form, allowing for immediate viewing, digital processing, and sharing.