Calculate Current Service Costs

question 61

Essay

Calculate current service costs
Suzanne Hannah, age 55, begins employment with Young Corporation on January 1, 2020 at a starting salary of $ 65,000. It is expected that Suzanne will work for the company for 10 years, retiring on December 31, 2029, when Suzanne is 65 years old. It is expected that her salary at retirement will be $ 140,000. Further assume that mortality tables indicate the life expectancy of someone age 65 in 2029 is 12 years.
Young Corporation sponsors a defined benefit pension plan with the following formula
Annual pension benefit on retirement = 2% of salary for each year of service, or 2% final salary x years of service.
Assume a discount rate of 5%
Instructions
Determine the current service cost for Suzanne Hannah at December 31, 2019.

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