Question

Pension plan assets were $1,500 million at the beginning of the year and $1,609 million at the end of the year. At the end of the year, retiree benefits paid by the trustee were $34 million and cash invested in the pension fund was $38 million.

What was the percentage rate of return on plan assets?

Answer 1

• Pension Plan assets are those funds which are used by company for meeting retired employees future compensation obligations.

→Such assets comprise of cash and investments like bonds, capital stock and annuities

• Percentage rate of return on pension plan assets:

Description	Amount
Plan assets at the begining of the year	100
Add. Cash invested in pension fund	7
	107
Less: Retirement benefits Paid	6
	101
Less: Plan assets at the end of the year	104
Return on plan assets @3% on $100 million	3

• Working Notes

  Rate of Return on plan assets =  Return on plan assets / Plan assets in the begining

→ Substituting the values:

Rate of Return on plan assets = 3 / 100 = 0.03

Hence, Rate of Return on plan assets - 3