Entry Age Normal Liability Calculator
Allocate a projected lump-sum retirement benefit to level annual normal costs from entry age to retirement and calculate the accrued liability for completed service.
Description
Allocate a projected lump-sum retirement benefit to level annual normal costs and calculate the accrued entry-age-normal liability.
Entry Age Normal Liability helps you allocate a projected lump-sum retirement benefit to level annual normal costs and calculate the accrued entry-age-normal liability.
Use this simplified pension calculator to illustrate how the entry age normal cost method spreads the present value of a retirement benefit over service from entry to retirement. It reports both the level normal cost and the liability associated with elapsed service.
When to use Entry Age Normal Liability
Use this simplified pension calculator to illustrate how the entry age normal cost method spreads the present value of a retirement benefit over service from entry to retirement. It reports both the level normal cost and the liability associated with elapsed service.1
How the calculation works
The projected retirement lump sum is discounted to entry age and divided by an annuity-due-like stream of level contributions. At the valuation year, the liability is the present value of the benefit less the present value of future normal costs.
NC = Bv^R / äR; ALt = Bv^(R−t) − NC × ä(R−t) 1Inputs and interpretation
B is a projected lump-sum retirement benefit, R is total years from entry to retirement, t is completed years since entry, and v is based on the selected annual discount rate.
Assumptions and limitations
This teaching model does not value an annual pension annuity and assumes no pre-retirement decrements, salary growth, vesting, benefit accrual changes, expenses, or contribution timing beyond the stated level pattern. It is not a funding recommendation.
References
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Advanced Long-Term Actuarial Mathematics Notation and Terminology — Society of Actuaries