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Entry Age AL versus Attained Age AL

B

barney

Member
Hi

One of the formulae for the Attained Age Actuarial Liability is the same as the formula for the Entry Age Actuarial Liability (i.e. the formula where you work out the present value of total expected benefits less present value of future expected contributions. So that says to me that the EAAL = AAAL.

Yet, later in the chapter it states that EAAL is greater than or equal to AAAL. And this fact is used in one or two exam questions.

How can EAAL be bigger than AAAL when the formulae are identical?

Thank you.
 
It's true that the EAAL and the AAAL have the same generic formula. But the SCRs under the two approaches may well be different and so the ALs will be different.

If the weighted average age of the membership is higher than the assumed entry age, then the AA SCR will be higher than the EA SCR. Therefore, the EAAL will be larger than the AAAL.
 
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