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Old 02-26-2018, 10:32 AM
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KernelMustard KernelMustard is offline
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Default Adjusting PBO benefit payments to ABO

I have a stream of PBO benefit payments which I can use for an accounting projection. I also need to do a funding projection, but I need an ABO benefit payment stream. Is there an adjustment I can make to the PBO stream using the weighted average salary increase and/or duration to get the ABO stream?
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Old 02-26-2018, 12:42 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
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Quote:
Originally Posted by KernelMustard View Post
I have a stream of PBO benefit payments which I can use for an accounting projection. I also need to do a funding projection, but I need an ABO benefit payment stream. Is there an adjustment I can make to the PBO stream using the weighted average salary increase and/or duration to get the ABO stream?
You might be able to estimate it based on some population statistics (e.g. in-force benefits, current service, future working lifetime, and average retirement age). You have to estimate the split of the PBO stream between current retirees and actives based on the timeline that the current retirees due out and the residual will be future retirees. Then for the future retiree piece you need a fraction accrued based on the current service for actives and TVs divided by projected service (should be current service plus number of actives times ~90% for the first year out and current service plus future working lifetime by the end of the projection).

This is probably going to be a bit more painful than most other Fermi estimates for pension. Usually things are easier when you already have multiple result types (PBO, ABO, PUC, EAN, plus population statistics) and you can isolate components of the total benefit projection based on some approximately linear relationships. If you only have a limited selection of results then you have to have an accrual model of some kind to work out an estimate of the other results.
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Old 02-26-2018, 05:50 PM
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KernelMustard KernelMustard is offline
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Ok thanks for the input. I have limited results from another actuary. I'll circle back around if I get stuck. I just needed some direction.
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