Actuarial Cost Method Law and Legal Definition

Actuarial cost method is an accounting technique used for calculating the relationship between a pension plan's present cost and its present future benefits. The present value of the future benefits that are payable to pension plan participants and fund administration expenses are computed and the costs are assigned to the respective accounting periods. This relationship shows the extent to which a pension plan's benefits are funded. The objective is to identify on a year-by-year basis the cost of benefits accrued for the particular year.