Actuarial Matters – Broadly Speaking

PA – We use an actuary to determine the amount of contributions needed in order to maintain a reasonable funded ratio for our DB plan.
Lee – What is an actuary?
PA – He or she is a professional who understands the inner workings of financial security systems, such as pensions. You’ve heard it said that a dollar in your hand today is worth more than a dollar you expect to receive in the future, haven’t you?
Lee – Yes.
PA – Actuaries use concepts such as the time value of money, together with the concept of probability, in the calculation of present values, which in turn become the building blocks in the development of actuarial models. You’ll learn more later.
Lee – I’ll look forward to it. Thank you.