Allocated Funding Instrument

AAA

DEFINITION of 'Allocated Funding Instrument'

A specific type of insurance or annuity contract that pension plans use to purchase retirement benefits incrementally. The allocated funding instrument is funded with employer contributions that are paid into the plan. The benefits that are purchased by the funding instrument are guaranteed to employees at retirement.

INVESTOPEDIA EXPLAINS 'Allocated Funding Instrument'

Pension plans that do not use allocated funding instruments use unallocated instruments instead. In these plans, there are no employer contributions available to purchase benefits before retirement. This means that no benefits are paid for at the time that the premium payments are actually made.

RELATED TERMS
  1. Evergreen Funding

    1. A British term that describes a revolving credit arrangement ...
  2. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
  3. Employer-Sponsored Plan

    A type of benefit plan that an employer offers for the benefit ...
  4. Funding Gap

    The amount of money needed to fund the ongoing operations or ...
  5. Lloyd's Of London

    A British insurance market where members join hands as syndicates ...
  6. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
Related Articles
  1. Cashing In On The Venture Capital Cycle
    Fundamental Analysis

    Cashing In On The Venture Capital Cycle

  2. What are the sources of funding available ...
    Investing

    What are the sources of funding available ...

  3. What is evergreen funding?
    Investing

    What is evergreen funding?

  4. Seek An Adventure In Venture Capital
    Personal Finance

    Seek An Adventure In Venture Capital

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center