Actuarial Cost Method

Actuarial Cost Method

Any method used to determine how much money the premiums to a pension must be each month. In order to remain solvent, a pension's premiums plus the return of investment must equal or exceed the amount paid out to retirees. The company managing the pension uses an actuarial cost method to calculate premiums based on that assumption. It is also called an actuarial funding method.
References in periodicals archive ?
A Statement Of The Actuarial Cost Method Selected And Actuarial Assumptions;
A comprehensive funding policy has several moving parts, including an actuarial cost method, asset-smoothing techniques, and the manner in which any unfunded liabilities are amortized.
To promote comparability, the GASB release calls for the use of a single actuarial cost method for measuring the value of the obligation, eliminating the variety of choices that are currently available.
Six actuarial methods are allowed; however, special disclosure is needed it the aggregate actuarial cost method is used.
Governments that use the aggregate actuarial cost method to disclose the funded status and present a multi-year schedule of funding progress using the entry age actuarial cost method as a surrogate; these governments previously were not required to provide this information.
An actuarial cost method provides a flexible funding schedule for computing both annual contributions and accrued liability for a pension fund.
The actuarial cost method and funding assumptions would allow the creation of large deductions.
Recommendation on which actuarial cost method should be used; entry age; frozen entry age, attained age, unit credit or aggregate;
actuarial cost method, asset smoothing, and amortization) that have standardized how an ARC is calculated have been eliminated from GAAP.
Actuarial cost method--One of the following actuarial cost methods should be used: entry age, frozen entry age, attained age, frozen attained age, projected unit credit, (10) or aggregate, as described in paragraph 41, Section B.
The requirements relating to governments using the aggregate actuarial cost method are effective for financial statements and required supplementary information that contains information from actuarial valuations as of June 15, 2007, or later.
Plans that use the aggregate actuarial cost method should disclose that because the method does not identify or separately amortize unfunded actuarial accrued liabilities, information about the plan's funded status and funding progress has been prepared using the entry age actuarial cost method for that purpose, and that the information presented is intended to approximate the funding progress of the plan.