Actuarial Cost Method

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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 ?
Current liability" is all liabilities to participants and beneficiaries under the plan, determined as if the plan terminated; it represents only benefits accrued to date, and does not depend on the actuarial funding method.
On the other hand, the majority would also allow preparers to adopt a less volatile variant of FASB Statement 87, or any actuarial funding method that calls for a greater annual contribution, because of the Board's concern about the relationship between governmental accounting and sound public policy regarding funding of defined benefit plans.
Specifically, the plaintiffs successfully challenged the state legislature's attempt to change from the aggregate cost method (AC) to the projected unit credit method (PUC) as the actuarial funding method used to determine the annual contributions to be made by New York public employers to the CRF.
Nonetheless, the legislature enacted Chapter 210 of the Laws of 1990, which mandated 1) changing the actuarial funding method from the AC method to the PUC method and 2) establishing a five-year stock valuation smoothing method as opposed to the four-year method for which the comptroller had opted.
The most common change has been where employers, seeking to reduce contributions to the pension fund, adjust certain assumptions used in an actuarial funding method or change the method itself.
All accepted actuarial funding methods will generate actuarially determined employer contribution amounts sufficient to provide all the resources needed to pay promised benefits on time if the underlying assumptions hold true.
Currently, employers may use any one of six acceptable actuarial funding methods for purposes of calculating OPEB expense.
For financing purposes, public-sector employers have tended to favor actuarial funding methods that produce annual contribution amounts that can be expected to remain relatively constant over time as a percentage of payroll.