Page 95 - Group Insurance and Retirement Benefit IC 83 E- Book

If it exceeds the accruing pension, the excess is carried forward as a credit against the

pension accruing in the following year, and so on until in due course a year is reached in
which the pension bought by the employee's contribution, when added to the excess

pension brought forward from the previous year, falls short of the pension accruing in the
year; a payment is then required from the employer, who will continue to make payments

in all subsequent years. In both cases employees' contributions are normally returnable in
full on death or withdrawal, generally without interest. The employer's premiums are

usually not returnable on death.

Traditional costing methods—-past service

There are three methods applicable to past service pensions:

Annual Premium method
As in the case of future service, the pension entitlement is calculated and bought by level

premiums up to normal pension date. The employer, pays the whole cost, and premiums

are usually not returnable on an employee's death.

Single Premium Indefinite Funding

The cost of purchasing all past service pensions outright by a single premium is
determined, and spread over a period by the use of an annuity-certain function. The

period is referred to as the estimated duration of the spread. Each premium is applied, as

it is paid, to purchase so far as is possible the pension (or the balance of pension) of the
employee nearest to normal pension date whose pension is not already fully purchased;

and so on. If more than one employee has the same normal pension date the premium can
be applied either to buy a proportion of the pensions of all such employees (assuming that

it is insufficient to buy the whole), or alternatively to buy pensions for individual

employees in order of seniority of age. Employees who leave service or die before their
pensions have been purchased are deleted from the rote; if the pensions have been

purchased, a surrender value is payable on withdrawal, and a return of premium is made
on death if premiums are being applied on that basis.