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FUNDING(QBS#11) (Assumptions (Economic
1) discount rate
2) salary…
FUNDING(QBS#11)
Funding policy
Advantages of well-tought and periodically reviewed FP
1) Helps organisation understand risk and rewards with course of particular actions
2) Formalize the company's long-term goals
3) Highligh wether pension objectives are consistent with company's overall objectives
Funding objectives
1) Contribution stability
2) Maximizing or minimizing contributions
3) Maximizing shareholder value/tax sheltering
4) Pre-funding of potential future plan improvements
5) Benefit security
6) Avoid interventions from regulators for under or over funding
7) Minimize pension plan accruals on the balance sheets
8) Equity among generations, or contributors and beneficiaries
9) Maintaining funding ratios comparable to competitors
Funding objectives will affect decisions around:
1) Actuarial cost method selected
2) conservatism of actuarial assumptions
text3) asset valuation method
4) Actual contribution rates between the minimum and maximum prescribed levels
5) Valuation frequency
Approches
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3)Terminal funding
Cotiser PVFB à la retraite ou au départ seulement
volatile et prestation non sécurisées
LOC peut couvrir financement si vente/acquisition
2)Advanced funding
Reasons for funding
1) Required by law
2) Tax advantages
3) Benefit security
4) Reduces the transfer of costs between generations of EE/taxpayers/shareholders/other
5) Reduces pension accounting expense and funding costs
6) Provide an orderly managing of CF to trustee
Reasons for NOT funding
1) ER may receive a higher after-tax return by investing in its business
2) Funding not as much as a concern for government EE
3) Public plans may be criticized for investing in private plans
Overfunding
Disadvantages
1) Past generations received less benefits
2) May receive pressure from EE to improve benefits
3) Surplus ownership may not belong to ER in case of WUP
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Assumptions
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Benefit entitlement
1) Retirement age
2) mortality
3) turnover
4) COLA
5) disability
6) form of benefits elected
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:warning:a) many assumptions are interelated
:warning:b) not suffient to determine assumption in isolation
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PfAD
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Use of PfAD:
1) Reduce likelohood of underfunding
2) does not prevent adverse experience
3) does not provide stabiliy of contribution
Gain and losses:
1) Investment returns different from best estimate
2) inflation different from best estimate
3) change in best estimate assumptions for inflation and return
4) plan specific events in control of ER : salary increase + layoff etc
5) plan systemic events affecting members : longevity
6) statistical fluctuations - specially for small plans
7) refinement of methods : data, programming, change of assumptions
Annuity certain : tu amortie les rdm des années 1 2 3 sur 4 ans, ensuite chaque résultat X annuité (#pmt=année du rdm) puis AVA = MV + Chaque résultat
40/60 : tu vas prendre (AVA prior + CF) 40% + MV 60%
Expected method: MV X%
corridor: actif espéré selon rdm attendu x%
Unit method : avg de la moyenne des valeur unitaire unit fin periode de avg
Reserve account: AVA entre 80% MV et 100%, si en haut de 100%, alors l'excess est mis de côté dans réserve
*PV valeur présente de CF - volatile
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