The PUC method is a generally accepted actuarial method and is used to determine the present value of the Defined Benefit Obligation (“DBO”) and the related Current ServiceCcost (“CSC”) and, where applicable, Past Service Cost/(Gain).
The PUC method sees each period of service earned during eligible service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
The PUC involves projecting – using salary escalation assumptions – each unit of benefit, up to future dates of leaving service, retirement, death or other future employment exit states, allowing for the probabilities of reaching those states, and then discounting those benefits back to the valuation date.
The resultant estimated employed lifetime liability amount reflects expected service to each of leaving service, retirement or death, or other exit states. This lifetime liability is then used to calculate the DBO and CSC.