WHAT IS 'Statement Of Changes In Net Assets Available For Pension Benefits'

A Statement of Changes In Net Assets Available for Pension Benefits is an income statement that reports on the current net assets of a pension fund. The function of this statement is to provide plan members a regular report on all of the transactions that affect the status of the pension.

BREAKING DOWN 'Statement Of Changes In Net Assets Available For Pension Benefits'

While the formats and details of pension fund statements will vary, the Statement of Changes In Net Assets Available for Pension Benefits will list all the additions and deductions from the available asset list for the pension fund.

Categories of additions to the available benefits will usually include investment income and employer contributions to the plan. Categories of deductions will often include administrative expenses, tax expenses, and pension benefits and death benefits paid out.

Typically, the largest adjustments will involve changes in the fair value of investments and pension benefits.

Impact of the Statement of Changes in Net Assets for Defined Contribution vs. Defined Benefit Plans

While the Statement of Changes in Net Assets for any given period can significantly impact any pension plan, whether it is a defined contribution plan or a defined benefit plan, individual members of defined contribution plans may be more watchful of the performance reported on this statement.

Participants in a defined contribution pension plan contribute a set amount of their income to a pension fund, and the performance of the fund over time, until the employee retires or otherwise liquidates the fund, determines the amount of actual return the participant will receive.

Participants in a defined benefit pension plan, on the other hand, have predetermined the benefit payout of the pension plan. Companies providing defined benefit plans to their employees assume the risk of the pension fund investments, so fund managers on behalf those companies will be more watchful of the performance of the Statement of Changes in Net Assets as they make determinations for the ways those funds are invested.

For many companies, pension funds represent large, long-term liabilities and complicated accrual accounting. Several common factors play into the complications of pension fund accounting, all of which will impact the Statement of Changes in Net Assets via the decisions made by fund managers. These factors include speculation on future estimates of payments to future retirees and making allowances for fluctuations in actuarial assumptions and investment returns from year to year.

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