Page 43 - Life Assurance
P. 43
t is the amount necessary to fund the
pension costs attributable to the current year's
operation of the plan. Liabilities under the plan
may arise because of an unfounded initial past
service liability, changes in actuarial
assumptions, and plan experience. If the
employer fails to meet the minimum funding
standard, a tax penalty is imposed.
In addition, changes in the interest rate used
to value pension liabilities have a significant
impact on defined benefit plans.
Integration with Social Security:
Many qualified private pension plans are
integrated with Social Security. Taking in
consideration the taxes factor, integration
provides a method for increasing pension
benefits for highly compensated employees
without increasing the cost of providing benefits
to lower-paid employees.
In a defined-contribution plan, the pension
contribution rate can be higher for employees
with earnings above a specified integration level
than for employees with earnings below that
level.
143 Life51/life/life 08
pension costs attributable to the current year's
operation of the plan. Liabilities under the plan
may arise because of an unfounded initial past
service liability, changes in actuarial
assumptions, and plan experience. If the
employer fails to meet the minimum funding
standard, a tax penalty is imposed.
In addition, changes in the interest rate used
to value pension liabilities have a significant
impact on defined benefit plans.
Integration with Social Security:
Many qualified private pension plans are
integrated with Social Security. Taking in
consideration the taxes factor, integration
provides a method for increasing pension
benefits for highly compensated employees
without increasing the cost of providing benefits
to lower-paid employees.
In a defined-contribution plan, the pension
contribution rate can be higher for employees
with earnings above a specified integration level
than for employees with earnings below that
level.
143 Life51/life/life 08
