Actuarial Cost Method

(redirected from Actuarial Cost Methods)

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 ?
Appendix A serves as an in depth explanation of six actuarial cost methods used with small pension plans.
Appreciation for the complexity of pension funding is increased after delving into this treatise of the numerous demographic and economic assumptions made by sponsors, along with the actuarial cost methods used.
Moreover, it is hard to argue that the use of the other actuarial cost methods is unsuitable for accounting and financial reporting purposes in light of years of experience under the current standards, and given the fact that all of the accepted actuarial cost methods ultimately produce the same result (i.
GASB: For purposes of determining the total pension liability of a sole or agent employer, as well as the service-cost component of pension expense, the present value of projected benefit payments should be attributed to financial reporting periods over each employee's projected service life using a single method--the entry age actuarial cost method applied on a level-percentage-of-payroll basis.
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.
3) Minimum amortization period--A significant decrease in the total unfunded actuarial liability generated by a change from one of the actuarial cost methods specified in subparagraph d of this paragraph to another of those methods, or by a change in the method(s) used to determine the actuarial value of assets (for example, a change from a method that spreads increases or decreases in market value over five years to a method that uses current market value), should be amortized over a period of not less than ten years.
The actuarial cost methods and associated actuarial functions are calculated in "Pension Valuation.
A number of actuarial cost methods are in common use, each generating a different way to disclose its normal cost and accrued liability underlying the same data and actuarial assumptions.
Under all acceptable actuarial cost methods used to value public pension costs and liabilities, future benefit payment cash flows are discounted to a present value based on long-term expected investment returns of the pension fund.
Essentially, pension expense is based on the payment due for the current year, as determined under the actuarial cost method chosen for funding the plan.
Actuarial cost method--One of die following actuarial cost methods should he used: entry age, frozen entry age, attained age, frozen attained age, projected unit credit, (18) or aggregate, as described in paragraph 47, Section B.
Separate determination and amortization of the unfunded actuarial liability are not part of the aggregate actuarial cost method and are not required when that method is used, with regard to the computation of die ARC; however, the disclosure requirements of paragraphs 30d(1), 30d(2)(e)(iv), and 35 are applicable when that method is used.