We take into account actuarial equivalent factors published by the plan when calculating the monthly benefit receivable by the ex-employee. However, that is where it ends, and in particular the return on plan investment is not used in our calculation.
It is a common misconception that the single sum value of benefits is calculated based on the investment return experienced internally by the plan. Instead, we determine a risk-free discount rate outside the plan. The stream of monthly pension payments is received by the retiree outside the plan. This means that gains or losses inside the plan have no impact on the external value of the payments outside the plan.
Posted in: Calculations & Methodology
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