Actuarial Equivalent

What is 'Actuarial Equivalent'

Actuarial equivalent is generally used for applying some measurement to two benefit plans to see if the resulting values are sufficiently close. Often, two or more payment streams of the benefit plans end up having the same present value based on the actuarial assumptions.

For example, actuarial equivalence measurements can be used to compare one specific benefit plan to a standard plan, to see if the plan is comparable in terms of coverage.

BREAKING DOWN 'Actuarial Equivalent'

Actuarial equivalence calculations are done on an average basis, not on an individual basis, and therefore, certain individuals will likely face different out-of-pocket costs under different plans.