Alternative Minimum Cost Method
Barron's Insurance Dictionary:
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Alternative Minimum Cost Method
Means of funding permitted under the employee retirement income security act of 1974 (erisa). The administrator of a pension plan can comply with required minimum funding standards by electing an alternative cost method under which the normal cost is the lesser of the normal cost (1) according to the actuarial cost method of the plan, or (2) according to the accrued benefit cost method without benefit projections.
| Alternative Dispute Resolution (ADR), Allocation of Plan Assets On Termination, Allocated Funding Instrument | |
| Alternative Risk Financing, Alternative Risk Financing Facilities, Ambiguity |
Investopedia Financial Dictionary:
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Alternative Minimum Cost Method
An ERISA approved method of funding pension plans. Pension plan administrators have two choices available to them when it comes to plan funding. The plan can be funded according to either the actuarial cost method or the accrued benefit cost method, which does not use benefit projections.
Investopedia Says:
The alternative minimum cost method requires complex actuarial calculations regardless of which specific alternative is used. Administrators will usually choose an alternative based on which is cheaper. The cheapest choice generally depends on various demographic factors pertaining to the plan participants.
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Barron's Insurance Dictionary
Dictionary of Insurance Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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