Actuarial Gains and Losses

Experience as it relates to the annual costs associated with a pension plan. In calculating premiums due under a pension plan, basic assumptions must be made concerning future loss experience and expenses. Actual loss experience can prove to be better or worse than envisioned. If the experience is better, the result is an actuarial gain. If the experience is worse, the result is an actuarial loss.

Difference between estimates and actual experience in a pension plan. For example, if the actual interest rate earned on pension assets exceeds the estimated rate, an actuarial gain results. Actuarial gains and losses are deferred and amortized to pension expense of future periods. The amortization of the actuarial gain will reduce pension expense. Actuarial gains and losses applicable to a single event not related to the pension plan and not in the ordinary course of business are recognized immediately in earnings. Examples are plant closing and segment disposal. See also Actuarial Cost Method.