CALCULATION OF PENSION FUNDS USING ACCRUED BENEFIT COST METHOD

Abstract

This research aims to conduct a comprehensive study on the issues related to pension funds for civil servants in Indonesia, focusing on the Accrued Benefit Cost Method (ABCM) for calculating pension funds in terms of normal cost. The ABCM is utilized to determine termination plan liabilities and actuarial liabilities within the normal cost calculation process. The study reveals that pension fund calculations can be effectively executed using the ABCM, which considers variables such as the employee's age at appointment (y), current age (x), retirement age limit (r), work period (t), remaining length of service (r-x), and initial salary. The findings highlight the necessity for the government to review the employee pension payment system, considering factors such as interest rate, pension benefit size, pension benefit value, termination plan liability value, and interest rate to prevent overburdening the state budget. The study concludes with specific financial implications: the termination liabilities for an employee retiring at age 27 is Rp. 16,824,999, with additional costs of Rp. 361,1431 for retirement after 7 years of service. Moreover, if all employees resign and the pension fund faces a deficit, the total additional cost for the 34-employee period until 2030 is Rp. 57,901,678. The use of the ABCM is justified as it provides a systematic and actuarially sound approach to calculate pension liabilities, ensuring accuracy and reliability in financial planning. This method aligns the pension cost with the employee's period of service, offering a clear reflection of the actual financial obligation incurred over time.