Pension Funding

Abstract

Chapter 3 discusses the application of multiple decrement model for evaluating the cost of a given pension plan at a specific time. Once the estimate of the ultimate cost of the plan is determined, the next step is to determine the contributions required to pay for the estimated cost in an orderly manner, so that the estimated cost of the plan is spread over future years. These actuarial techniques are referred to as actuarial cost methods or actuarial funding methods. A funding method specifies the pattern, that is, the frequency, and the amount of aggregate contributions, required to balance the benefit payments. Chapter 4 elaborates on some methods such as accrued benefit cost method for an individual and for a group, aggregate actuarial cost method which takes into account the unfunded liability. All the methods are illustrated with R code for two accrual functions. The command driven R software brings out very clearly the successive stages in statistical computations.