For questions 2 and 3, I get the math, but just conceptual;y why do you have to make payments in year 15 for deferreds and active acrueds? i get why you would want inflation indexed and nominal bonds in your portfolio to account for those liabilities which will cause a cash outflow later on, but why are payments made in year 15 to people who havent retired yet?
I think the chart is very confusing. I don’t conceptually understand what the chart is saying because its not cash out flows (payments out) or cash inflows (payments in)… it must be something else…
its just breaking down all of the components of PBO and asking you to identify what assets you can purchase to mimick the respective liability in a liability relative portfolio. i get all that, just the fact that you actually have to make payments for non-retirees in year 15 is what is confusing me
I actually do not understand how an US pension plan works…so can i ask a question…
Assum i am an paticipant of an US company pension plan…what happen with my money in the plan if one day I left the company to work for other company…(deferred)
The table is an estimate of future payments. Perhaps some active workers will retire in less than 15 years.
The exhibit may be related to a set of employees who are expected to retire after 15 years.
Or think company will shutdown by 15 th year.
Don’t worry CFAI EOCs have so many such complications, we discussed one yesterday.