Costs related to a new pension plan that are necessary to "catch up" for services rendered prior to the inception of the pension plan are classified as

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Prior service costs are related to services rendered by employees prior to the inception of the pension plan, and it is necessary to "catch up" the benefits for those employees. As the name suggests, prior service costs are costs associated with benefits for services rendered in the past. The other options, such as actuarial losses, retroactive deferred charges or service costs, are not related to catching up for services rendered prior to the inception of the pension plan, but rather reflect other aspects of the pension plan such as changes in assumptions used in the plan or current year benefits earned respectively.

Costs Related to a New Pension Plan That Are Necessary