Expense loads in funding

[FAPInJax]

A plan uses an expense load for funding a plan.

This expense load would not be included in the calculation of the present value of the accrued benefits.

However, does it / does it not, get included the calculation of current liability and PBGC premium liability.

It is an actuarial assumption, so my feeling is that it is included in current liability but PBGC premiums appear to be a different animal (just basically an unfunded accrued liability number - so I would No on it).

Other opinions are greatly appreciated (my thanks go out in advance)

[SoCalActuary]

Interesting issue: PBGC premium is based on the actuary's choice of mortality table for funding. If the funding assumption uses a load, is this required for the PBGC premium?

My guess is "no" subject to the agreement of the PBGC actuaries. But this could get twisted easily. For example, a reasonable annuity rate is $140 per dollar of monthly benefit at age 65.

If I used a "die-tomorrow" table that produces $100 per dollar of monthly benefit, then add a 40% load, I get the reasonable annuity rate. But I have really reduced the PBGC variable premium liability if the load is not used there.

[david rigby]

Interesting, but I suspect the original Q was contemplating a different type of load. The response to that may be the usual "it depends." What type of load is the actuary currently using? If it is a common technique of adding $X or Y% to the contribution, then that probably is not part of CL or PBGC liability, and is often expressed as a load to the NC, not a load to the AL or PVAB.

[Guest Ron Sevcik]

I would also vote 'No', that the expense load is not included in the current liability or the PBGC premium liability. I am assuming the the expense load is just that, a load for the expenses that the trust will be paying as part of the ongoing operation of the plan. The current liability and PBGC premium liability are indications of where the plan stands right now.

SoCalActuary, I don't see how you could use a '$100 per dollar of monthly benefit' to reduce the PBGC premium liability. Isn't the PBGC liability calculated by using the interest rate specified by the PBGC and the 1983 GAM tables? I don't see how you you have any choice in the APR that you use.

[SoCalActuary]

Good point. But plans with over 500 lives can use an EA's certification that the values on plan funding assumptions are less than plan assets, so they don't always use the 83 GAM tables.