Page 299 - Group Insurance and Retirement Benefit IC 83 E- Book

For those employees for whom the amount payable as per the formula does not exceed Rs.1,000,000,
over the expected period of service, the amount payable will be divided by the expected period of
service and the resulting amount will be attributed to each year of the expected period of service,
including the period before the stipulated period of 5 years.

In case of the remaining employees, the amount as per the formula exceeds Rs. 1,000,000 over the
expected period of service of 10 years, and the amount of the statutory threshold of Rs. 1,000,000 is
reached at the end of 8 years. Rs. 1,25,000 (Rs. 1,000,000 divided by 8) is attributed to each of the
first 8 years. In this case, no benefit is attributed to subsequent two years. This is because service
beyond 8 years will lead to no material amount of further benefits

74 Where the amount of a benefit is a constant proportion of final salary for each year of service, future
salary increases will affect the amount required to settle the obligation that exists for service before
the end of the reporting period, but do not create an additional obligation. Therefore:

(a) for the purpose of paragraph 70(b), salary increases do not lead to further benefits, even though
the amount of the benefits is dependent on final salary; and

(b) the amount of benefit attributed to each period is a constant proportion of the salary to which
the benefit is linked.

Example illustrating paragraph 74

Employees are entitled to a benefit of 3 per cent of final salary for each year of service before the
age of 55.

Benefit of 3 per cent of estimated final salary is attributed to each year up to the age of 55. This is
the date when further service by the employee will lead to no material amount of further benefits
under the plan. No benefit is attributed to service after that age.

Actuarial assumptions

75 Actuarial assumptions shall be unbiased and mutually compatible.

76 Actuarial assumptions are an entity’s best estimates of the variables that will determine the ultimate
cost of providing post-employment benefits. Actuarial assumptions comprise:

(a) demographic assumptions about the future characteristics of current and former employees
(and their dependants) who are eligible for benefits. Demographic assumptions deal with
matters such as:

(i) mortality (see paragraphs 81 and 82);

(ii) rates of employee turnover, disability and early retirement;

(iii) the proportion of plan members with dependants who will be eligible for benefits;

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