Actuarial Valuation/Value

A measure of assets to liabilities of a pension fund to determine if the fund will be able to meet its future payout obligations.

Statistics and assumptions allow the actuary to make an educated judgment about the future health of the pension fund. Interesting that a job of relying on data also includes something as flimsy as "educated judgment."

The valuation of assets is determined by the employer contribution rate, as well as expected rates of growth of the fund's investments. Liabilities are valued on risk assessment of future interest rates, employee contribution rates, wage growth rates, inflation rates, mortality rates, and future retirement ages.

If the ratio of assets to liabilities is greater than 1, then the fund is in good shape and future liabilities will be covered. However, scary times hit if the valuation is less than 1. Time to revalue, or find a job with a statistically healthy pension, or perhaps an actuarialist with better judgment.