1. Lecture 23 Pension Plan Funding
Pension Plan Funding Instruments
Actuarial Cost Methods
Actuarial Assumptions

2. Pension Plan Funding Instruments
Trusts
Grantor - employer
Trustee - party holding funds
Beneficiaries - employees
Fiduciary responsibilities

3. Pension Plan Funding Instruments - (cont.)
Insurance Contracts
Allocated
Individual life insurance or annuity contracts
Group permanent life insurance contracts
Group deferred annuity contracts
Unallocated
Group deposit administration contracts
Immediate participation guarantee contracts
Separate accounts funding
New money crediting

4. Actuarial Cost Methods
Accrued benefit
Projected benefit
Past Service Cost
Individual level-premiums method
Entry-age normal
Aggregate
Attained-age normal
Frozen initial liability

5. Actuarial Assumptions
Interest rate
Mortality
Turnover
Salary scale
Retirement
Disability
Inflation

6. Summary Pension funding requirements are complex
Significant choice in methods used to value pension plan funding needs
Employer needs to select the actuarial method and assumptions that best meet the objectives of the plan