The Accumulated Benefit Obligation (ABO) is a company's pension obligation that accounts for the current value of benefits earned by participants up to a given date, calculated using current salaries and service years, without considering future salary increases. This financial metric is critical in assessing the financial health and obligations of a company's defined benefit pension plan.
Balance sheet reserves are amounts set aside in pension plans and other insurance contracts, expressed as liabilities on the company's balance sheet, to ensure future benefit payments to policy owners.
A specialized division within a bank engaged in settling estates, administering trusts and guardianships, and performing various agency services, known for a conservative investment philosophy.
A type of hybrid pension plan in which each participant's benefit is stated as a hypothetical account balance, increased with pay credits for additional service and interest credits to reflect the passage of time.
A deferred group annuity is a retirement income product where income payments start at a future date and continue for life, funded through annual contributions that purchase single-premium deferred annuities.
Deferred retirement refers to the act of postponing retirement beyond the normal retirement age, which typically does not result in an increase in monthly retirement income when the employee actually retires.
A defined-benefit pension plan promises to pay a specified amount to each person who retires after a set number of years of service. These plans pay no taxes on their investment income.
The Employee Retirement Income Security Act (ERISA) of 1974 governs most private pension and benefit plans, easing pension eligibility rules, establishing the Pension Benefit Guaranty Corporation (PBGC), and setting guidelines for managing pension funds.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
An Enrolled Actuary is a professional actuary accepted by the Internal Revenue Service (IRS), whose signature is required for IRS Form 5500 to demonstrate the tax compliance of a pension plan.
Payment to a beneficiary that remains constant over time, such as a fixed monthly retirement income benefit.
A General Retirement System encompasses all mechanisms and financial arrangements designed to provide individuals with income or benefits during their retirement years. These systems often include pensions, social security, and personal retirement savings plans.
A Guaranteed Income Contract (GIC) is a financial instrument typically utilized within corporate profit-sharing or pension plans wherein an insurance company guarantees a specific rate of return on invested capital over the contract's duration.
An annuity that provides payments to two or more beneficiaries, typically a husband and wife. When one of the annuitants passes away, the survivor continues to receive annuity payments; however, the payments made to the deceased are not transferred to the survivor.
A non-contributory pension scheme is an occupational pension scheme in which all the contributions are made by the employer, enabling employees to receive retirement benefits without having to make any contributions themselves.
In the context of pension or profit-sharing plans, nonforfeitable benefits are those that are guaranteed and not conditioned upon further length of service or performance requirements.
Normal cost represents the portion of the economic cost of a participant's anticipated pension benefits allocated to the current plan year, usually distinct from accounting accrual cost or the cash outlay required in that year.
A private pension plan credit given to an employee’s past service with an employer prior to the establishment of a pension plan. Usually, a lower percentage of compensation is credited for benefits for past service than for future service benefits.
Past Service Liability refers to the obligations to fund an employee's benefits in a pension plan for their prior service before entering into the pension plan. It is a crucial element in pension planning and impacts the financing of future benefits.
PBGC Guaranteed Benefits refer to the portion of pension benefits that are guaranteed by the Pension Benefit Guaranty Corporation (PBGC) in the event that the pension plan sponsor defaults.
The Pension Benefit Guaranty Corporation (PBGC) is a federal corporation established under the Employee Retirement Income Security Act (ERISA) to guarantee basic pension benefits in covered plans. It administers terminated plans and can place liens on corporate assets for certain unfunded pension liabilities.
A Pension Freeze refers to the situation when a pension plan sponsor decides to eliminate future pension accruals for plan participants, although the plan itself remains in existence to pay out already accrued pensions.
A plan sponsor is an entity that establishes and maintains a pension or insurance plan, ensuring compliance with government guidelines, financial transparency, and proper benefit allocation.
The actuarial present value as of a specific date of all benefits attributed by the pension benefit formula to employee service performed before that date. It is measured using assumptions as to future compensation levels if the pension benefit formula is based on those future salary levels (e.g., pay-related, final-pay).
Termination of a plan refers to the cessation of a pension plan, done either through a standard termination or a distress termination method. Each approach has specific legal and financial implications.
In financial and legal contexts, 'vest' generally refers to granting an individual full ownership of certain assets or benefits after meeting specific conditions, such as a period of service in a company.
Withholding refers to the portion of an employee's wages retained by the employer for the purpose of paying various taxes, insurance plans, pension plans, union dues, and other deductions.
