👉 Pension math is the calculation of future retirement benefits based on current contributions, investment returns, and other factors. It involves determining the present value of expected future pension payments, which are typically based on an employee's salary and years of service. The formula used is often the projected unit credit (PUC) method, where each year of service contributes a portion of the expected pension benefit. This portion is calculated by multiplying the employee's average annual salary for the year by a formula that considers factors like expected salary growth and retirement age. The PUC is then discounted back to the present using an assumed rate of return to arrive at the total pension liability. Additionally, contributions from employers and sometimes employees are factored in to cover these liabilities, ensuring that the pension plan remains solvent and can meet its future obligations.
