Total Actuarial Liabilities and Normal Costs Using The Unit Credit Method

Shindi Adha Gusliana

doi:10.47194/orics.v2i3.177

Authors

Shindi Adha Gusliana
shindi19001@mail.unpad.ac.id

Keywords:

Pension fund, actuarial obligations, normal costs, unit credit method, actuarial liabilities

Abstract

The pension fund program requires an actuarial calculation, such as the amount of actuarial obligations and normal costs for each pension fund participant. Total actuarial liabilities are calculated to show the company's liability for pension benefits for pension fund participants. Funding in pension funds is obtained from the normal costs or contributions paid by participants to the pension fund. By using the unit credit method, the total value of actuarial liabilities at 1/1/2020 is IDR 405,338.5. Then by using the unit credit method, it is projected that the normal cost on 1/1/2019 is IDR 1,071.43. The calculation method on funding aims to ensure that the collected pension plan funds will be sufficient to pay pension benefits to participants when they retire.

References

Ananta, A., Moeis, A. I. A., Widianto, H. T., Yulianto, H., & Arifin, E. N. (2021). Pension and active ageing: Lessons learned from civil servants in Indonesia. Social Sciences, 10(11), 436.

Asthana, S. (1999). Determinants of funding strategies and actuarial choices for definedâ€benefit pension plans. Contemporary Accounting Research, 16(1), 39-74.

Baltas, I., Dopierala, L., Kolodziejczyk, K., SzczepaÅ„ski, M., Weber, G. W., & Yannacopoulos, A. N. (2022). Optimal management of defined contribution pension funds under the effect of inflation, mortality and uncertainty. European Journal of Operational Research, 298(3), 1162-1174.

Biggs, A. G. (2011). An options pricing method for calculating the market price of public sector pension liabilities. Public Budgeting & Finance, 31(3), 94-118.

Gold, J. (2005). Accounting/actuarial bias enables equity investment by defined benefit pension plans. North American Actuarial Journal, 9(3), 1-21.

Novy-Marx, R., & Rauh, J. D. (2009). The liabilities and risks of state-sponsored pension plans. Journal of Economic Perspectives, 23(4), 191-210.

Novy-Marx, R., & Rauh, J. D. (2011). Policy options for state pension systems and their impact on plan liabilities. Journal of Pension Economics & Finance, 10(2), 173-194.

Posedel, P., & Primorac, M. (2012). Modelling local government unit credit risk in the Republic of Croatia. Financial theory and practice, 36(4), 329-354.

Ridho, S. L. Z., Sabli, H. B. H. M., & Setiawan, H. (2021). The Cross-Provincial Data of Life Expectancy Effect on Pension Fund in Indonesia. International Journal of Social Science and Business, 5(2).

Shilton, J. (2021). Who owns the city? Pension fund capitalism and the Parkdale rent strike. JL & Soc. Pol'y, 35, 1.

Thorndahl, S., & Andersen, C. B. (2021). CLIMACS: A method for stochastic generation of continuous climate projected point rainfall for urban drainage design. Journal of Hydrology, 602, 126776.