• In the past decade or so, the once-sharp distinction between insured pension plans and non-insured pension plans has greatly diminished. Now, it is perhaps more meaningful to discuss a spectrum rather than a dichotomy.
  • While many plans do not involve an insurance company, many others do, to one degree or another. Any such involvement may permit a plan to be classified as split-funding. "Split-Funding" has become such a broad term that it has definitely lost some of its usefulness. For the purpose of this discussion, let me simply address myself to the subject of participation by the insurance industry in the multi-billion dollar process of establishing and maintaining pension plans.
• At the risk of boring most of you in the audience, I would like to begin with some elementary concepts. 
• In earlier days, pensions might be funded by the purchase of retirement income policies, where the monthly income at retirement may be 1% to 2% of the face amount of the policy, or by the purchase of some other form of endowment policies. It is still a common practice to fund with relatively high cash value ordinary life policies (when pre-retirement death benefits are desired) along with an auxiliary fund. Most of the risks are transferred to the insurance company and most of the services are performed by the insurance company. At retirement, annuities are purchased to provide the regular benefits, risk-free to the plan sponsor. 
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• Then came the development of the deposit administration contract, primarily a Group product. Where the Individual side is concerned, more and more emphasis is placed on auxiliary funds to the extent that such funds may be considered small DA's. DA's involve the buildup of a fund deposited with an insurance company. The deposits are based on contribution amounts that are determined each year by the use of some funding method and consist of usually the normal cost plus some amortization of the past service cost. The fund is not allocated to active lives prior to retirement. At retirement, annuities are purchased at guaranteed premium rates.

--  Yuan Chang

1976 - SOA - Pension Funding Vehicles, Society of Actuaries - 18p