Allocated Funding Instrument

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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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What are the sources of funding available for companies?

    Despite all the differences among companies, there are only a few sources of funds available to all firms. 1. They make ... Read Full Answer >>
  2. What is evergreen funding?

    Evergreen funding is a term used to describe the incremental addition of money into a business. Before a business is started ... Read Full Answer >>
  3. What's the difference between pre-money and post-money?

    The short answer to the question is that they differ in timing of valuation. Both pre-money and post-money are valuation ... Read Full Answer >>
  4. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
  5. How are non-qualified variable annuities taxed?

    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
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    You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can ... Read Full Answer >>

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