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to when employees will retire, how long they will live after
retirement, how many will have spouses entitled to benefits, the
annual cost of the benefits for each retired employee or spouse,
and an interest rate for discounting the stream of benefits to
present value.
An actuary uses an actuarial cost method to assign the present
value of promised benefits to individual plan years as an annual
cost. The portion of the total cost of the plan that is assigned
by the actuarial cost method to the current year or to a future
year is called the normal cost.
In general, six actuarial cost methods (or variations thereof)
are used for purposes of computing pension costs. They include (1)
the unit credit method (also known as the accrued benefit cost
method); (2) the entry age normal cost method; (3) the individual
level premium cost method; (4) the aggregate cost method; (5) the
attained age normal cost method; and (6) the frozen initial
liability cost method. The methods discussed by the parties’
experts are the aggregate cost method (respondent’s preferred
method), the entry age normal cost method (petitioners’ preferred
method), and the individual level premium cost method (the method
Mercer used in 1991 and the one which we find satisfies the
requirements of section 419A(c)(2)).
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