Business Glossary

actuarial method of crediting retirement benefits earned and the costs associated with these earned retirement benefits. An increment (unit) of benefit is credited for each year of recognized service that an employee has earned. Then the present value of these benefits (including the employee's life expectancy) is calculated and assigned to the year earned. The benefit earned by the employee can take the form of a flat dollar amount or a percentage of compensation. For example, this may work out to 1½% of an employee's compensation being credited to the employee's account for each year of recognized service.