Pension Funding by Normal Costs or Amortization of Unfunded Liabilities

We discuss the extent of the actuary\u27s freedom in choosing the funding method for defined benefit pension plans. In particular, we look at funding through a combination of normal costs, amortization of an unfunded liabilities, and fund of assets. The IRS constraint on reasonable funding methods is considered, with particular mention of the aggregate entry age normal method. In addition, an algebraic development is performed of year-to-year changes in the status of a plan\u27s funding