Definition and Meaning
Unfunded Supplemental Actuarial Value (USAV) refers to the shortfall between the Supplemental Actuarial Value of a pension plan and the Actuarial Asset Value (AAV). Essentially, this is the amount needed to cover the anticipated benefits over the life of the pension plan that currently isn’t covered by the available assets.
Etymology
The term is a combination of:
- “Unfunded”: indicating a shortfall or lack of funds.
- “Supplemental Actuarial Value”: representing additional actuarially determined values required to cover pension benefits.
- “Actuarial Asset Value”: denoting the total value of assets available for covering pension obligations.
Background
Unfunded Supplemental Actuarial Value underscores the gap within a pension plan’s funding, drawing attention to potential long-term financial shortfalls. This term is significant, particularly for actuaries, pension fund managers, and regulatory authorities, due to its implications on the financial health and solvency of pension plans.
Key Takeaways
- Assessment of Shortfall: USAV reflects the difference between necessary and available funds in a pension plan.
- Use in Financial Planning: Essential for determining whether a pension fund can fulfill its long-term obligations.
- Regulatory Importance: Help in regulatory supervision and ensuring compliance with pension legislation.
Differences and Similarities
Differences:
- Unfunded Liability: Refers to the overall shortfall in a pension plan, not just the supplemental amount.
- Actuarial Value of Assets vs Actuarial Liability: While one reflects the value of current assets, the other is the total future obligations.
Similarities:
- Both USAV and other actuarial values deal with predictive measures and funding statuses of pension plans.
Synonyms
- Pension Shortfall
- Actuarial Deficit
- Funding Gap
Antonyms
- Fully Funded Status
- Pension Surplus
Related Terms and Definitions
- Actuarial Present Value (APV): The current value of future pension obligations.
- Funded Ratio: The ratio of pension assets to pension liabilities.
- Pension Plan Solvency: The ability of a pension plan to meet its obligations.
Frequently Asked Questions
What constitutes the Supplemental Actuarial Value?
Supplemental Actuarial Value (SAV) includes additional actuarial calculations that consider special circumstances and anticipated future irregularities in pension forecasts.
Why is it critical to understand Unfunded Supplemental Actuarial Value?
Understanding USAV helps in assessing the financial health of pension plans and aids in future financial planning and decision-making.
Engaging Quizzes on Key Pension Terms
Exciting Facts
- The concept of Unfunded Supplemental Actuarial Value was pivotal in resolving numerous pension crises by establishing more accurate funding requirements.
Quotations from Notable Writers
“Financial planning without adequate actuarial insights is akin to sailing without a compass.”
- Eleanor O’Brien, Financial Author
Proverbs
“Prepare for the worst and guarantee the best.”
Humorous Sayings
“Running a pension fund without enough dough is like promising a pizza party with only crusts to go around.”
References and Literature
- “Actuarial Mathematics of Pension Plans” by Michael Kafka
- “Pension Fund Excellence: Creation, Investment, and Risk Management” by Keith P. Ambachtsheer and D. Don Ezra
Thinking beyond numbers and funds, Oscar W. Bell, 2023-10-04
“Securing a future doesn’t happen by chance; it happens by choice and calculated design.”
