What are Actuarial Gains and Losses?

Actuarial gains and losses comprise the difference between the pension payments actually made by an employer and the expected amount. A gain occurs if the amount paid is less than expected. A loss occurs if the amount paid is higher than expected. It is necessary to have expected pension amounts, due to the need to factor such issues as employee tenure and the rate of pay increases into pension calculations.

A common cause of actuarial gains and losses is changes in the demographic assumptions associated with a pension plan. For example, an actuary might make adjustments to the estimated employee retirement age, mortality rate, or speed of employee turnover. Even small changes in these assumptions can lead to substantial actuarial gains or losses.

Gains and losses can also arise from adjustments in actuarial assumptions.