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Tools & Resources » General Insurance Term Glossary

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death benefit

The amount of money paid or due to be paid when a person insured under a life insurance policy dies. This amount does not include adjustments for outstanding policy loans, dividends, paid-up additions, or late premium payments. See also basic death benefit and policy proceeds.

death claim

A request for payment under the terms of a life insurance policy.

debits

In the numerical rating system, debits represent underwriting factors that have an unfavorable effect on an individual's mortality rating. Debits are assigned positive values. See also credits and numerical rating system.

debtor-creditor groups

A group composed of lending institutions—banks, credit unions, savings and loan associations, finance companies, retail merchants, and credit card companies— and their debtors. See also group creditor life insurance.

decreasing term insurance

A type of term life insurance in which the amount of coverage decreases during the term of coverage.

decrement

A reduction in the number of participants in a pension plan caused by factors such as retirement, disability, death, or termination.

deductible

A flat amount that an insured must pay before the insurance company will make any benefit payments under a health insurance policy. Also called the deductible amount or initial deductible. See also calendar year deductible, corridor deductible, family deductible, integrated deductible and per cause deductible.

deferral date

A date some time after the first anniversary of a group insurance policy to which an insurance company defers the payment of the policy's first renewal premium. An insurance company might defer this payment so that it could use the full first year's experience to help calculate the new premium.

deferred annuity

(1) A series of payments in which the first payment is postponed (deferred) for one or more periods. (2) An annuity contract under which premiums are accumulated at interest but the annuity payment period is postponed (deferred) for one or more periods. See also deferred life annuity and group deferred annuity.

deferred compensation plan

A plan established by an employer to provide benefits to an employee at a later date, such as after the employee's retirement.

deferred life annuity

A deferred annuity that provides a series of payments, each of which is made only if a designated person is alive.

deferred premium arrangement

In group insurance, an agreement between an insurer and a policyholder to lengthen a group insurance policy's grace period, on a permanent basis, usually by 30, 60, or 90 days. This arrangement allows the policyholder to use the deferred premium amounts for the length of time by which the grace period is extended. The arrangement is usually only granted to companies with excellent credit ratings. Also called a premium-delay arrangement.

deferred premiums

Premiums that are due after a policy's statement date but before the next policy anniversary.

defined benefit formula

A formula used to determine the periodic payment amounts that each participant in a defined benefit pension plan will receive at retirement. The benefit amount is often related to number of years of participation in the plan.

defined benefit pension plan

A pension plan that specifies the benefits that the plan promises to pay to a participant upon retirement, with the benefits determined according to a specified formula. Contrast with defined contribution pension plan.

defined contribution formula

A formula that describes the amount of money that will be deposited into a pension plan each year on behalf of each plan participant. Usually, the contribution is a specified percentage of the participant's compensation.

defined contribution pension plan

A pension plan that specifies the amount of annual contributions that the plan sponsor will make on behalf of a plan participant. A defined contribution plan does not guarantee a specific amount of retirement benefits. A participant's benefits at retirement are based on the amount that has been contributed to the participant's account, plus investment earnings. Contrast with defined benefit pension plan.

dental maintenance organization

An organization like an HMO which provides only dental care.

dentist-consultant

A licensed dentist who understands the underwriting intent of dental plan language as well as the accepted standards of dental practice, and who advises insurers as to the appropriateness of dental treatment.

dependent life insurance

Group life insurance made available to group members, usually on an optional and contributory basis, to cover the spouse, children, or other dependents of the group member. It is usually sold in small amounts which are intended to pay funeral expenses.

deposit administration contract

A funding vehicle for a pension plan in which the plan sponsor places plan assets in an insurance company's general account. When a plan participant retires, the insurer withdraws sufficient funds from the general account to buy an immediate annuity for the plan participant. A deposit administration contract usually protects the plan sponsor against investment loss and guarantees minimum investment returns. See also immediate annuity and immediate participation guarantee (IPG) contract.

deposit term insurance

A type of level term insurance that requires a substantially larger premium payment in the first year than the amount of level annual premiums payable in subsequent years.

determination letter

In the United States, a ruling by the Internal Revenue Service (IRS) as to whether the design of a pension plan satisfies the criteria necessary for the plan to be a qualified plan.

deviated rate

In group creditor insurance in the United States, a premium rate for a contributory plan which is higher than the prima facie rate and based on the group's actual claims experience. Insurers can charge a deviated rate only after the prima facie rate has been in effect for a certain period of time and only after being granted permission by the state insurance commissioner. Contrast with prima facie rate.

diagnostic related groups (DRGs)

In the United States, a prospective payment method used in the Medicare Program, in which payment is not based on the number and kinds of medical services that a patient receives, but instead is based on the diagnosis of each patient.

direct response distribution system

In insurance, a distribution system that relies on advertisements, telephone solicitations, and mailings to generate sales. No agents visit customers to induce sales.

direct response marketing

A method of selling insurance products directly to the consumer, usually through direct mail, advertising in print and broadcast media, or by telephone solicitation, without the use of insurance agents.

disability

Inability to work due to an injury or sickness. See also partial disability, presumptive disability, and total disability.

disability benefits

Benefits that are payable periodically while an insured continues to be disabled. "Being disabled" is generally defined in terms of inability to work. See also total disability.

disability buy-out insurance

Insurance that provides cash funds to a business or professional partnership so that the business interests of a totally disabled partner or stockholder may be purchased if the disability is long-term or permanent.

disability income insurance

A type of health insurance designed to compensate insured people for a portion of the income they lose because of a disabling injury or illness. Generally, benefits for disability income insurance are provided for the disabled person in the form of monthly payments. Sometimes called loss of time insurance. See also long-term disability income insurance and short-term disability income insurance.

disability table

(1) A tabulation of the probabilities of becoming disabled at each age, plus certain related figures. (2) A tabulation of the number of persons who are still disabled at each age and the duration of disability, plus certain related figures.

disabled life annuity

A series of payments, each of which is contingent on a person being alive and still disabled.

discharge provision

Part of a small estates statute which releases an insurance company from liability under an insurance contract if it pays the proceeds to the deceased insured's estate. See small estates statutes.

Discontinuity Index

A test required by the NAIC Model Life Insurance Disclosure Regulation and designed to disclose instances in which policy illustrations have been manipulated so that they present an unrealistic progression of premiums, dividends, and benefits.

disintermediation

The process of removing money from a financial intermediary in order to earn a higher yield somewhere else, usually with another financial intermediary. Historically, disintermediation, through policy loans or surrendered policies, has been a major problem for life and health insurers during periods of economic depression and high inflation.

distress termination

In pension and employee-benefit plans, the curtailment of a plan which does not have sufficient funds to cover all the benefits to which the plan's participants are entitled. Contrast to standard plan termination. See also involuntary plan termination and voluntary plan termination.

distribution expenses

Expenses involved in making insurance products available to the general public. These expenses include agent compensation, group sales representatives' salaries, and postal, printing, and telecommunications expenses for those companies that use direct response marketing.

distribution system

In an insurance company, the network of organizations and individuals that performs all the marketing activities required to convey a product from an insurer to its customers.

dividend

(1) A refund of excess premium paid to the owner of an individual participating life insurance policy. Such a dividend is paid out of an insurer's divisible surplus. Also called a policy dividend or a policyowner dividend. See also divisible surplus. (2) The portion of a group insurance premium that is returned to a group policyholder whose claims experience is better than had been expected when the premium was calculated. Also called experience rating refund, experience refund, and retroactive rate reduction. (3) A periodic payment paid by a business to a stockholder. Dividends paid in cash are called cash dividends. Dividends paid in the form of additional shares of stock are called stock dividends.

dividend accumulations

Amounts that result when a policyowner decides to leave the policy dividends owed to him or her on deposit with the insurer. Also called dividend credits.

dividend expenses

When an insurer calculates policyowner dividends, dividend expenses represent the amount of money that it costs the insurer to maintain each policy in force for the current year.

dividend interest rate

The interest rate that represents the actual rate being earned on an insurer's present investments. The dividend interest rate is used to calculate policyowner dividends.

dividend options

Several alternatives that participating policyowners can choose from to indicate the manner in which they want to receive their share of the insurance company's divisible surplus. See accumulation at interest option, additional term insurance option, automatic dividend option, cash payment option, dividend accumulations, enhancement type policy, paid-up additions, and premium reduction option.

dividend rate of mortality

The rate of mortality (for a given age) that an insurer chooses to use in calculating policyowner dividends. The dividend rate of mortality is the mortality rate currently experienced by the insurer on the policies it has sold.

divisible surplus

The portion of an insurance company's earnings that is available for distribution to the owners of the company's participating policies. See also surplus.

doctrine of reasonable expectations

A doctrine applied by some courts under which the reasonable expectations of policyowners and beneficiaries will be honored, even though the language of the policy does not literally support these expectations.

domestic corporation

From the point of view of a particular state in the United States, a company incorporated under the laws of that state. Compare to alien corporation and foreign corporation.

double indemnity

Death benefit coverage that pays an additional benefit equal to the basic death benefit of the policy if the insured's death is accidental. See also accidental death benefit (ADB) rider.

dread disease policy

See limited coverage policy.

drinking criticism

An underwriting term for evidence of alcohol abuse or alcoholism.

dual-choice provision

In the United States, part of the Health Maintenance Organization Act of 1973 which requires employers that meet certain specifications to offer health insurance through a federally qualified HMO as an alternative to a traditional health insurance plan.

dual registration

The licensing of registered representatives with more than one broker-dealer.

duplicate coverage inquiry (DCI) form

In the United States, a form filled out by a health insurance company claim office and sent to another company in order to ascertain whether an accident or injury for which the first company has received a claim is also insured by the second company.

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early retirement age

An age specified in a pension plan that is earlier than the plan's normal retirement age but at which a plan participant can still receive an immediate pension benefit. The benefit received at early retirement is usually actuarially reduced from the amount that would have been received had retirement occurred at the normal retirement age. See also late retirement age and normal retirement age.

election period

A 60-day period following notification of an insured's eligibility for COBRA continuation coverage, during which the individual can accept or decline the coverage.

elective contributions or elective deferrals

In the United States, contributions to an employee's Section 401(k) plan (cash or deferred arrangement) that are made by the employer on the employee's behalf. The contributions are made using before-tax dollars obtained through a voluntary reduction of the employee's salary. The contributions are tax-deferred to the employee. See also matching contributions and nonelective contributions.

eligibility period

In contributory group insurance plans, the period of time, usually 31 days, during which a new employee may apply for group insurance coverage.

eligibility requirements

The conditions a person must meet in order to be a participant in a group life insurance, group health insurance, or retirement plan.

elimination period

See waiting period.

employee contribution

See percentage contribution.

Employee Retirement Income Security Act of 1974 (ERISA)

A United States federal law establishing (a) the rights of pension plan participants, (b) standards for the investment of pension plan assets, and (c) requirements for the disclosure of plan provisions and funding. ERISA also established the Pension Benefit Guaranty Corporation (PBGC).

employee's cost basis

In the United States, an amount that is subtracted from the total amount of a distribution to a pension plan participant, in order to determine the portion of the distribution that is subject to federal taxation. The cost basis is the amount on which an employee has already been taxed. It includes the amount of the nondeductible contributions made to the plan by the participant, any cost of plan- provided life insurance that was reported as taxable income by the participant, and other factors, including the amount of any employer contributions previously taxed as income to the participant.

employee stock ownership plan (ESOP)

Generally, any qualified employee-benefit plan, which invests some, or all plan assets in employer stock. In the United States, ERISA further defines an ESOP as either a qualified stock bonus plan or a combination qualified stock bonus plan and defined contribution pension plan designed to invest primarily in employer securities. The employer's contributions are tax deductible for the employer and tax deferred for the employee.

endorsement

See rider.

endorsement method

A method of changing the beneficiary of a life insurance policy. The change may be made in one of two ways: (a) The policyowner returns the policy to the insurance company, and the insurer attaches the endorsement with the name of the new beneficiary to the policy, or (b) the policyowner does not send the policy to the insurer but only requests the change by letter or telephone, and the insurer sends an endorsement with the change to the policyowner. Contrast with recording method.

endowment insurance

A type of life insurance that provides a benefit (a) if death occurs during a specified number of years or (b) if, at the end of the specified number of years, the insured is alive.

enhancement type policy

A life insurance policy in which part of each dividend provides paid-up additions, while the other part provides one-year term insurance to produce a predetermined total death benefit.

enrolled actuary

In the United States, a pension actuary who meets the standards of and is enrolled by the federal agency known as the Joint Board for the Enrollment of Actuaries.

entire contract provision

A life insurance policy provision which states that the policy itself, along with a copy of the application for insurance, if attached, constitutes the entire agreement between the insurer and the policyowner.

equitable assignment

An assignment that does not meet the requirements of a legal assignment but which will be enforced in an equitable action if fairness so requires.

equity-based insurance product

A life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of a portfolio of equity investments. The owners of this type of insurance product accept the risk of sharing in the insurer's investment gains and losses. Equity investments are investments by virtue of which investors gain part ownership in a corporation. The primary type of equity investment is corporate stock. See also variable annuity, variable life insurance, and variable universal life insurance.

equity pension

A pension which provides benefit amounts that, at least in part, vary in accordance with the investment results of a portfolio of common stocks and other investment vehicles. The equity portion of the pension benefit is meant to provide retirees with benefits that increase as inflation rises.

equivalent level annual dividend (ELAD)

One amount presented to consumers as part of the interest-adjusted method of comparing the costs of life insurance policies. The equivalent level annual dividend is meant to represent the part of the interest-adjusted payment and the cost that is, in effect, not guaranteed by the insurer, because dividends will change in the future as the insurer's experience changes. This amount gives the buyer an indication of the extent to which these nonguaranteed amounts affect the interest-adjusted payment and the cost of a policy.

equivalent single payment

One payment that can replace several other payments, because it equals the value of the other payments.

equivocal suicide

An apparent suicide in which there is doubt about whether the deceased intended to die as a result of an apparently self-destructive act.

ERISA

See Employee Retirement Income Security Act of 1974 (ERISA).

error and omissions (E&O) insurance

Insurance designed to cover claims that result from the negligent acts or mistakes of an agent, including (1) his or her vicarious liability stemming from negligent acts or (2) mistakes committed by individuals for whom the agent is legally liable.

ESOP

See employee stock ownership plan (ESOP).

estate planning

An insurance program designed not only to provide funds for the prospect's dependents upon the death of the prospect, but also to conserve, as much as possible, the personal assets that the prospect wants to bequeath to heirs. Estate planning usually involves accountants, lawyers, and the trust officers of banks, as well as insurance agents.

evidence of insurability

Proof that a person is an insurable risk.

excess interest

The amount of interest above the guaranteed amount, that an insurance company pays on a settlement option when interest rates are high.

exchange program

A program that allows a proposed insured who is replacing a policy to obtain the new policy on the basis of little or no evidence of insurability if his or her insurability has recently been established by the company that issued the original policy.

exclusion rider

See impairment rider.

exclusions

Losses for which an insurance policy does not provide benefits. For accidental death benefit coverages, exclusions describe causes of death which do not qualify as accidental. In health insurance policies, exclusions describe losses not covered, such as those related to pre-existing conditions, cosmetic surgery or self-inflicted injuries.

exclusive agents

Career agents who are under contract with one insurance company only and who are not permitted to sell the products of other insurers. Also known as captive agents.

exclusive territory

Under the general agency distribution system, a territory in which no individual other than the general agent is permitted to offer the insurer's products. Compare to nonexclusive territory and overlapping territory.

exculpatory statute

Legislation in community-property states that allows an insurer to pay the proceeds of a life insurance policy in accordance with the terms of that policy without fear of double liability.

exoneration statutes

Statutes that excuse the insurer from liability if a party claims policy proceeds which the insurer has already paid to a third party in good faith and without knowledge of any conflicting claim.

experience rating

The process of using a group's own premium and claims experience to calculate premium rates. If the claims experience for the previous year was favorable, the insurer considers reducing the premium rates for the coming year. If the experience was unfavorable, the insurer attempts to discover the reason and may propose higher premium rates for the next year. See also blended rates and manual rates.

experience refund

(1) The portion of a group insurance premium that is returned to a group policyholder whose claims experience is better than had been expected when the premium was calculated. Also called a dividend, an experience rating refund, and a retroactive rate reduction. See also dividend. (2) The portion of a reinsurance premium that is returned to the ceding company when claims experience is better than had been expected when the premium was calculated.

experimental underwriting

The practice of cautiously accepting specific types of risk that are considered uninsurable according to the insurer's normal underwriting guidelines.

express authority

The authority that a principal explicitly confers on an agent. See agent and principal. Compare to apparent authority and implied authority.

extended term insurance option

A nonforfeiture option in which the cash value of a policy is applied as a net single premium to purchase paid-up term insurance. The amount of term insurance is equal to the death benefit of the policy being surrendered less any outstanding policy loans. The insured maintains the same amount of coverage but usually for a shorter period of time than the original coverage. See also nonforfeiture options.

extra-percentage tables method

A commonly used plan for rating substandard risks. Under this method, each substandard class is charged a premium rate that is a certain percentage above the standard premium rate. Contrast with flat extra premium method.

F | Top

face amount

In a life insurance policy whose benefit is not variable, the amount stated as payable at the death of the insured or (in the case of an annuity) at the maturity of the contract. It is generally shown on the first page of the policy. Also called the face value. See also basic death benefit, death benefit, and policy proceeds.

face page

The first page of an insurance policy. The face page normally includes the insured's name and age, the name of the policyowner (if different from the insured's name), the amount of premiums, the policy number, the date on which the policy was issued, and the signatures of the insurance company's president and secretary.

facility-of-payment clause

A life insurance policy provision that permits an insurer to pay all or part of the policy proceeds either to a blood relative of the insured or to anyone who has a valid claim to those proceeds. The facility-of-payment clause enables the insurer to pay benefits in a timely manner when such benefits cannot be made to the beneficiary identified in the insurance contract.

factor table

A table used by insurance underwriters to determine an applicant's net worth by specifying what an applicant's annual income should be multiplied by to arrive at the maximum allowable amount of insurance.

Fair Credit Reporting Act (FCRA)

A United States federal law designed to help ensure that consumer reporting agencies act fairly, impartially, and with respect for the consumer's right to privacy when preparing consumer reports on individuals. See also consumer reporting agency.

family benefit

A life insurance policy rider that provides term insurance coverage on the insured's spouse and children.

family deductible

A single deductible which, when satisfied, relieves a family of the burden of satisfying a deductible for each individual family member.

family income insurance

A specialized individual policy that commonly combines whole life insurance with decreasing term insurance. The whole life insurance portion of the policy is usually paid as a lump sum when the insured dies. The decreasing term insurance portion of the policy provides an income for a predetermined period to help support the insured's family.

family insurance policy

A life insurance policy that covers all the members of a family under one contract.

federally qualified HMO

In the United States, a Health Maintenance Organization which satisfies specific requirements set forth in the Health Maintenance Organization Act of 1973. Federally qualified HMOs are entitled to certain grants and loans from the federal government and are eligible to be used by employers to satisfy the dual choice provision.

fee schedule

A schedule or list of maximum benefits that will be paid under a group medical contract for certain listed procedures. See also relative value schedule. May simply be called a schedule.

fee schedule basis

A compensation plan used in health maintenance organizations (HMOs) and preferred provider organizations (PPOs) in which a physician is paid a predetermined amount for each service that the physician provides. See also capitation basis.

fiduciary

A person or organization who holds, manages and has discretionary authority and control over money belonging to an other person or organization, or who renders investment advice in exchange for compensation. When an insurance company manages pension funds, the insurance company is acting as a fiduciary.

field force

Those insurance agents who work out of an insurer's field offices.

field offices

An insurance company's local sales offices.

field underwriter

See insurance agent.

field underwriting

The first step in the risk selection process. Field underwriting occurs when an agent gathers pertinent information about the proposed insured and reports that information on the application blank so the home office underwriter can make an underwriting decision.

final average (final earnings) benefit formula

A type of defined-benefit formula in which the retirement benefit amount is derived on the basis of a participant's average compensation during a specified period (usually the three to five years preceding retirement) during which the participant was most highly compensated. Contrast with career average benefit formula.

financial institution

An organization that helps to channel funds through an economy by accepting the surplus money of savers and supplying that money to borrowers, who pay to use the money. Insurance companies are financial institutions.

financial intermediary

A financial institution that borrows money on its own account and loans money to other borrowers. Insurance companies are financial intermediaries.

financial settlement

A lump sum payment by an insurer to a disabled insured that extinguishes the insurer's responsibility under the disability contract. Also known as a buy-out or commutation.

first-dollar coverage

Medical expense insurance under which no deductible or coinsurance is applicable to covered expenses.

first-year commission

An amount paid to an insurance agent based on a policy's first annual premium amount.

501©(9) trust

In the United States, a type of trust that many self-insured groups establish to fund their group insurance plans. All contributions to a 501©(9) trust are deductible for federal income tax purposes, as are all investment gains made on funds in the trust. The trust must meet certain federal government requirements. Also called a voluntary employees' beneficiary association (VEBA). See also self- insured group insurance.

fixed amount option

A life insurance settlement option under which the insurer uses the policy proceeds plus interest to pay the beneficiary a sum of money in a series of annual or more frequent installments for as long as the proceeds plus interest last. Also called the fixed payment option.

fixed period option

A life insurance settlement option under which the insurer pays the beneficiary the policy proceeds plus interest in a series of annual or more frequent installments for a specified length of time.

flat amount formula

A method of determining the retirement benefit for participants in a defined benefit pension plan. A flat amount formula provides the same periodic (e.g., monthly, annual) benefit amount, for example $500 per month, to each retiree. See also flat percentage of earnings formula and unit-benefit formula.

flat extra premium method

A method for rating substandard risks used when the extra risk is considered to be constant. The underwriter assesses a specific extra premium for each $l,000 of insurance. Contrast with extra-percentage tables method.

flat percentage of earnings formula

A method of determining the retirement benefit for participants in a defined benefit pension plan. This method provides for each participant to receive a certain percentage of pre-retirement compensation, for example 60%. The actual payment amount under this formula depends on how compensation is defined. See also career average benefit formula, final average benefit formula, flat amount formula, and unit-benefit formula.

flexible benefit plan

See cafeteria plan.

flexible premium annuity

A deferred annuity that gives the purchaser the right to vary the amount of each premium paid to the insurer during the accumulation period.

foreign corporation

From the point of view of a particular state in the United States, a company that is incorporated under the laws of another state. Compare to domestic corporation and alien corporation.

foreseeability

The ability of an insured to have had a reasonable anticipation that harm or injury would be a likely result of a certain act or an omitted act.

forfeiture

The unvested amount that remains in a pension or profit sharing plan when a participant leaves the plan and withdraws the amounts which are vested. Forfeitures may occur when an employee is terminated, for example. Forfeitures must either be used to reduce the plan sponsor's future contributions to the plan or be reallocated to other participants.

fractional premiums

Premiums that are paid in installments during a year, such as semiannually, quarterly, or monthly. Fractional premiums are so called because they are fractions of the annual premium.

fraternal benefit society

An organization that exists to provide social and insurance benefits to its members. In such a society, members often share a common religious, ethnic, or vocational background, although some fraternals are open to the general public.

fraternal insurance

Insurance coverage issued by a fraternal benefit society. See also open contract.

fraudulent claim

A type of claim that occurs when a claimant/insured intentionally uses false information in an attempt to collect policy proceeds.

fraudulent misrepresentation

According to common law, a false statement which meets the following three criteria: (1) the party that makes the statement is aware that it is not true or disregards whether it is true; (2) the party that makes the statement does so in order to induce another party to enter into a contract; (3) the other party does enter into a contract as a result of the statement and suffers a loss because of the contract.

free examination period

The period of time after delivery of an insurance policy during which the policyowner may review the policy and return it to the company for a full refund of the initial premium. Full coverage is in force during this period. Also called a ten- day free look.

front-loaded policy

A life insurance policy (usually a universal life insurance policy) in which most of the expense charges take the form of deductions from each premium payment. Such deductions continue throughout the premium payment period. See also back-loaded policy and universal life insurance.

full-service plan

A health insurance plan which pays in full the actual cost, if reasonable and customary, of services received, rather than a specified maximum for each service.

fully contributory

An arrangement in which the insureds under a group policy pay the entire cost of their insurance. Contrast with contributory group insurance and noncontributory group insurance.

funding agency

The party who holds the assets of a pension plan. Often an insurance company.

funding standard account

For qualified pension plans in the United States, a bookkeeping account which is maintained in order to determine whether a defined benefit pension plan is meeting minimum funding standards set by law. Many of the entries to the account are derived actuarially. If at any time the plan's funding is inadequate, then an accumulated funding deficiency is said to exist. Also known as a minimum funding standard account. See also minimum funding standards.

funding vehicle

The legal document which governs the management of pension funds by a funding agency. When the funding agency is an insurance company, the funding instrument is usually an insurance contract. Also called the funding instrument.

future service

The prospective service that an employee will provide to an employer from the date of entry into a pension, or from the current date, to the employee's normal retirement date. Pension benefits provided for this service are known as future service benefits. See also past service.

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