Glossary of Pension Terms

ア行

• 移行割合（年金制度） | Transfer Ratio

  When a pension plan is incorporated into retirement benefit provisions of the work rules, the ratio of annuity provided by the pension plan to the total lump sum promised under the work rules indicates how much benefit obligations are transferred to the pension plan. E.g. 50% of the total retirement benefit, 60% of the benefits for retirees with age 50 or above, etc. 100% of the retirement benefit (is transferred to the pension plan) means the retirement benefits promised under the work rules are 100% covered by the pension plan.

• 一時金選択率 | Lump Sum Election Rate

  One of the assumptions used in actuarial valuations; it refers to the expected percentage of annuity-eligible retirees who opt for lump sum.

• 一般勘定 | General Account

  An investment vehicle with guaranteed interest offered by life insurance companies.

• 内枠移行 | (Incorporated Pension Plan)

  A pension plan structure in which a corporate pension plan functions as a vehicle to fund a part of retirement or termination lump sum promised under the work rules (retirement allowance regulations). Either a fixed percentage of the lump sum is provided by the pension fund and the rest by unfunded book reserve (yokowari: horizontal) or payments for certain ages or service (e.g. normal retirement) are provided by the pension plan (tatewari: vertical), or a combination of both.

• 運営管理機関 | DC Provider

  A company which administers defined contribution plans. A provider must obtain license from the Minister of Health, Labor and Welfare.

カ行

• 会計基準変更時差異 | Transition Obligations

  The retirement benefit obligations at initial adoption of the accounting standard minus assets and reserve for retirement allowance under the previous standard. This amount is to be amortized equally over certain years (maximum 15 years).

• 開放基金方式 | Open Group Aggregate Method

  A type of funding methods under which the normal contribution is set based on the expected payments for existing participants and future enrollees after the valuation date while the special contribution is set if the normal contribution is not enough to cover the total benefits. The basic part of EPFs applies this method.

• 確定給付企業年金 | Defined Benefit (DB) Plan

  A corporate pension scheme governed by the Defined Benefits Corporate Pension Law enacted as of April 2002. The DB plans include contract type and fund type. The contract type is administered by a trust bank appointed by an employer and the scheme is based on the plan provision agreed between the employer and its employees. The fund type is run by a separate entity established by an employer to administer, invest and make benefit payments to its participants.

• 確定拠出年金 | Defined Contribution (DC) Plan

  A corporate pension scheme governed by the Defined Contribution Pension Law enacted at October 2001. Unlike traditional defined benefit plans, contributions are paid into individual account and the final benefits are determined based on the investment performance of the assets rather than promised in advance. Japanese DC plans have an employer sponsored non-contributory Corporate type and Individual type managed by the National Pension Fund Association to which employees contribute themselves up to the tax deductible limit.

• 確定年金 | Fixed Annuity

  An annuity in which payments continue for a fixed years irrespective of the life or death of the insured.

• 下限予定利率 | Statutory Minimum Interest Rate

  A statutory minimum interest rate to be used to calculate DB plan contributions. In EPFs and DB plans, the rate is announced by the Minister of Labor, Health and Welfare every year and is determined based on the lesser of average yield of 10 year Government Bond issued in the immediate year or that over past 5 years. In Tax Qualified Pension Plans (TQPP), the rate is modified annually under the Article 5-4 of Enforcement Ordinance of Corporate Tax Laws based on the average yield to maturity on 10 year Government Bond issued in the past year. If the expected return on assets falls below this minimum interest at the time of recalculation of contributions, the expected return must be amended to be higher than the statutory minimum interest.

• 過去勤務債務（会計） | Past (or Prior) Service Liability: PSL

  Increase / decrease of benefit obligations caused by plan amendments etc. To be amortized over certain years within average remaining years of service.

• 過去勤務債務 | Past (or Prior) Service Liability: PSL

  The term is generally used to indicate the underfunding of pension plans (not the same as the PSL in pension accounting). In TQPP, PSL means the difference between the actuarial reserve and assets. In EPF and DB plans, the present value of income from special contributions for the purpose of amortizing underfunding is called the "unamortized PSL balance".

• 簡便法 | Simplified (Valuation) Method

  A method in the Japanese GAAP to use the total lump sum benefits payable as at valuation date as a substitute for PBO. This method is applicable to small companies with less than 300 employees in principle.

• 期間定額基準 | Straight-line attribution

  A type of pro-rata method to allocate the projected benefit obligations and service cost in direct proportion to the years of service. This method is primarily used in the Japanese GAAP.

• 基礎年金 | Basic Pension

  The first tier of the National Pension which pays fixed annuity upon death, disability and reaching a certain age (age 65 in principle).

• 基礎率 | Assumptions

  Discount rate, Expected rate of return on assets, Turnover rate, Mortality rate, Salary Increase rate, Lump Sum Election rate, Interest Credit rate (for cash balance plan) etc. are used as assumptions to calculate projected benefit obligations and periodic benefit costs.

• 企業年金連合会 | Pension Fund Association

  The association was created by the Employee's Pension Insurance Law in 1967 as a representing body of corporate pension funds. One of its major roles is to take over the benefit of the employees who leave a Employee's Pension Fund with less than 10 years of service to ensure the continuation and maintenance of pension benefits among Employee Pension Funds.
  It also conducts research on issues relating to domestic and foreign corporate pension markets, lobby for legislations etc., and provide information, advice and training to the members.

• 期待運用収益 | Expected Return on Assets

  Plan assets at beginning of year multiplied by the expected rate of return on assets.

• 期待運用収益率 | Expected Rate of Return on Assets

  Expected rate of return to be earned on the assets at the beginning of the year and is determined based on the portfolio of assets, past performance, investment strategy and market trend etc.

• 期末要支給額 | Accrued Benefits at end of year

  Benefits to be payable if retired or terminated at fiscal year end. It usually indicates lump sum benefits based on voluntary leave. Companies using the simplified method in the Japanese GAAP often use this amount as retirement benefit obligations.

• 加入年齢方式 | Entry Age Normal Funding Method

  A level premium method in which a normal contribution calculated based on a single average age of entry is determined as the standard contribution that would pay for the total expected benefits of the entire group. If the standard contribution is not sufficient, a special contribution is applied. This is the most popular funding method in Japanese corporate pension plans.

• 給付現価 | Present Value of Benefits

  The discounted sum of total retirement benefits promised to be paid in the future. It is calculated by accumulating each year's [probability of payments x expected benefits x discount rate to the payment date]

• 給与基準 | Pro-rata Basis (proportion to salary)

  A type of pro-rata method to allocate the projected benefit obligations and service cost in direct proportion to the total salary. This method can be used in the Japanese GAAP only when the salary is structured systematically over service period and the labor value is rationally reflected in the pensionable salary used for the valuation.

• 給与クレジット | Pay Credit

  Annual or monthly contributions paid in to an employee's hypothetical account in the Cash Balance plan. In EPF and DB plans, the pay credit is either a fixed amount or a fixed percentage of salary.

• 共済年金（共済組合） | Mutual Aid Pension

  The National Pension for civil servants, which includes Mutual Aid Association of National Government Employees, of Local Government Employees and Mutual Aid Corporation of Private School Personnel.

• 勤務費用 | Service Cost

  Actuarially calculated present value of the benefits earned by active employees during the period of valuation.

• 原始数理債務 | Initial Actuarial Obligation

  In EPF, it indicates the present value of benefits after subtracting the present value of normal contributions and the government's share of the expenditure and adding the exceptional contributions.

• 合計特殊出生率 | Total Fertility Rate (TFR)

  The average number of children that a woman would have over her lifetime.

• 厚生年金基金 | Employee's Pension Fund (EPF)

  A non-mandatory corporate pension plan established by the employee's pension insurance law, which contracts out a part of the earnings-related portion of the public Employee's Pension and administers it on behalf of the government. Although it is given the biggest tax breaks among corporate pension plans, the number has been in decline due to dismantling or returning the contracted-out portion back to the government.

• 厚生年金保険 | Employee's Pension Insurance

  The earnings-related public pension for employees and it provides old age pension, disability pension and survivor's pension.

• 公的年金 | Public Pension

  Public pension includes National Pension, Employee's Pension Insurance, and Mutual Aid Pension.

• 国民年金 | National Pension

  The public pension system that covers all citizens aged 20 to 60 and it is categorized in 3 groups; the first insured group is self-employed and students etc. The second group is salaried employees and civil servants, and the third group is dependent spouses of the second group.

• コリダールール | Corridor Approach

  An amortization method of actuarial gains and losses under the IAS10 and FAS87. To the extent that the actuarial gains and losses fall inside a corridor of 10% of the higher of the plan asset or PBO, the amortization is not required.

• コントリビューション・ホリデー | Contribution Holiday

  When a pension plan has a surplus, the contribution to the plan is put on hold.

サ行

• 最低責任準備金 | Minimum Actuarial Reserve

  The amount to be returned to the Pension Fund Association for the portion of fund that is contracted out of the social insurance when an Employee's Pension Fund dissolves. The amount is determined based on the amount as of the end of September 1999 taking into account the exempt premium rate, benefits payable and interest. The interest rate is updated annually based on the actual return on the welfare pension (social insurance).

• 最低積立基準額 | Minimum Funding Requirement

  A minimum amount of assets for EPF and DB plans to hold in order to pay the minimum promised benefits to participants in case the plan is terminated as of the calculation date. This is a discounted sum of the minimum required payments, and the discount rate is set between 0.8 times and 1.2 times the standard interest rate based on average return on 30 year Government Bond for the most recent 5 years.

• 最低保全給付 | Minimum Required Payments

  The benefits accrued over service period to the valuation date in EPF and DB plans, and it is considered a minimum right of the participants to be protected. The minimum required payments for the participants who have not yet reached the eligibility for annuity will be total accrued lump sum benefits to valuation date.

• 再評価率 | Interest Credit

  In a cash balance plan, interest credit is applied to each employee's hypothetical account. It needs to be set based on objective rate such as government bond yields etc. above zero.

• シェア | Share

  When a corporate pension plan is managed by multiple service providers, each provider's allocation is called a share. Sometimes the allocations of contributions and of obligations are different. A change of shares means a change of service providers.

• 支給倍率基準 | Pro-rata basis (proportion to the Multiplier)

  A type of pro-rata method to allocate the projected benefit obligations and service cost in direct proportion to the multiplier of salary. This method can be used in the Japanese GAAP only when the increase of multipliers properly reflects the value of labor in each period.

• 事前積立方式 | Advanced Funding Method

  Financing method in which assets are funded in advance to prepare for future payments. Opposite: Pay-as-you-go Method.

• 私的年金 | Private Pension

  Private pension includes employer sponsored corporate pension plans and individual annuity products offered by life insurance companies etc.

• 終身年金 | Whole Life Annuity

  Annuity payable as far as the annuitant is alive.

• 重要性の原則（割引率の変更） | The principles of changes in discount rate

  If the difference between the year-end benefit obligations calculated using the previous discount rate and the same obligations calculated using the revised discount rate reflecting the market interest rate is within 10 percent, the discount rate is not required to be revised.

• 受給待期者 | Vested pensioner in a waiting period

  A participant in a pension plan who is eligible for annuity benefit but has not yet reached the pension commencement age. His or her pension amount is fixed except for the interest rate for the deferred period.

• 純資産額 | Net Assets

  Add liquid assets to the pension assets (fixed assets) calculated based on the market value and subtract liquid liabilities and reserve for outstanding payments (also overfunding balance in EPF). The financial assessment of EPF and DB plans on non-ongoing basis is done based on Net Assets.

• 数理計算上の差異 | Actuarial Gains/Losses

  Gains and losses arising from gaps between theory and practice, such as the gap between expected return on assets and actual return, increase/decrease of PBO resulted from a change of assumptions etc., and is recognized over average remaining service and included in periodic pension cost.

• 数理債務 | Actuarial Liability

  An amount of liability calculated by deducting the income from normal contributions from the present value of benefits in the DB plans. In EPF it indicates the liability for the "plus alpha" supplemental benefits portion and [the actuarial liability plus minimum actuarial reserve] is the total liability of the fund.

• 据置期間 | Deferral Period

  A length of period from retirement or termination to the commencement of annuity payment.

• 据置利率 | Deferred Interest Rate

  Interest rate applied during the deferral period based upon which a benefit factor is set. In a cash balance plan, this is a recalculated interest credit applied from the loss of membership to the commencement of annuity payment.

• 責任準備金 | Actuarial Reserve

  The amount that needs to be reserved to secure the future benefit payments. In the DB plans it is calculated by deducting normal and supplemental contributions from the present value of benefits. In EPF, it is calculated by deducting the special contributions from the total of actuarial reserve and minimum actuarial reserve, adding or deducting the asset value adjustments. In TQPP, it is calculated by deducting the normal contribution from the present value of benefits.

• 選択一時金 | Optional Lump Sum

  A lump sum payment elected by a vested pensioner or vested pensioner in waiting period in lieu of annuity. It is usually calculated by multiplying annuity conversion factor by the annual annuity amount.

• 全部移行

  A pension plan structure in which all of the retirement allowance under the work rules is payable from a corporate pension plan.

• 総合設立 | Multi-employer EPF

  A type of Employees Pension Funds established by several employers in the same sector or same region. Usually there is a prominent entity or health insurance association with strong influence over the employers who wish to set up the fund. The establishment of a fund requires minimum 5,000 employees.

• 外枠移行 | Separate Pension Plan

  A pension plan structure in which a corporate pension plan exists as a separate benefit from and is payable in addition to the retirement allowance regulations. Opposite: Incorporated Pension Plan.

• その他包括利益 | Other Comprehensive Income (OCI)

  The items in the comprehensive income that are not included in the net income, e.g. changes in the market value of assets etc. In the U.S. GAAP, actuarial gains/losses or PSL are included in OCI.

タ行

• ターミナルファンディング | Terminal Funding

  1. A funding method in which lump sum contributions (present value of annuity) are made when an employee retires.

• 第一拠出金 | Normal Contribution or Standard Contribution

  Contributions to meet the payments to be accrued over the future service period.

• 代行返上 | Returning the Contracted-out Portion (daiko henjo)

  Since 2002, EPFs have been allowed to transfer the earnings-related portion of the statutory Employee's Pension that they had contracted out back to the government.

• 退職給付会計 | Accounting for Retirement Benefits

  Accounting standard to account for retirement benefits comprehensively as the value of labor as accrued irrespective of different payment or funding methods.
  It is applicable to the companies that report financial reporting and with accounting auditor in accordance with the Financial Instruments and Exchange Law. Director's retirement benefit scheme is not subject to follow the accounting.

• 退職給付債務（原則法）| Projected Benefit Obligations (PBO)

  Expected total benefits at retirement earned to date and discounted to the present value.

• 退職給付信託 | Retirement Benefits Trust

  A securities-based trust fund set up by an employer for employee retirement benefit purpose. The fund can be considered plan assets when meeting the following requirements;
  (1) It is set forth in the retirement benefit provisions etc. that the trust is solely for the purpose of retirement benefits.
  (2) It is a third party benefit trust for retirement benefits
  (3)The trust is legally separated from the personal assets of the trustee, and any fraud act or transfer of the trusted assets to the trustee is prohibited.
  (4) The management, administration and termination of the trust must be carried out by the fiduciary in accordance with the trust agreement.

• 退職給付引当金 | Accrued Pension Cost

  The benefit obligation minus plan assets and unrecognized liabilities (unrecognized actuarial gains/losses, unrecognized PSL, and unamortized transition obligations), to be recorded on the balance sheet as liability for retirement benefits. If it becomes asset, it will be Prepaid Pension Cost.

• 退職給付費用 | Periodic Pension Cost

  A sum of Service Cost, Interest Cost, Amortization Cost of Transition Obligations, of Actuarial Gains/Losses, and of PSL, and Expected Return on Assets.

• 退職給付見込額 | Expected Benefit Payments

  Expected benefits to be payable upon retirement or termination in the future, calculated using salary increase rate etc.

• 脱退時特別掛金 | Withdrawal Contribution

  A special contribution that the withdrawing company is required to pay when withdrawing membership from EPF or DB plan. The calculation method is stipulated in the provisions and is based on the underfunding of the plan at withdrawal.

• 単独設立 | Single-employer EPF

  A type of Employee Pension Fund established by a single employer. The parent and its all affiliated companies belonging to the parent must join the fund in principle. The establishment of the fund requires 1,000 employees.

• 遅延認識 | Deferred Recognition of Gains and Losses

  Instead of immediately recognizing the actuarial gains and losses or prior service cost in full, recognize them over average remaining service period. It is not available under the simplified method of Japanese GAAP.

• つなぎ年金 | Bridge Pension

  Annuity to cover the income-less period between retirement and payment commencement of public pension. It could be an individual annuity contract with life insurance companies, or a company sponsored pension plan.

• デフォルトファンド | Default Fund

  An investment product of a defined contribution plan that is stipulated in the provisions as a fund to which contributions are automatically allocated for those who do not make investment decisions. When a product other than a principal guaranteed product is chosen as the default fund, the details of the product should be communicated to the participants.

• 特別勘定 | Special Account

  An investment vehicle offered by life insurance companies. Unlike the general account, the investment performance directly impacts the plan assets and there is no guaranteed return.

• 特別法人税 | Special Corporate Tax

  1.173% per annum (national tax 1%, municipal tax 0.173%) is imposed on the assets of pension plans including DB plans, EPF, TQPP, DC plan etc., but this tax is currently frozen (not imposed) until March 31, 2011.

• 特例掛金 | Exceptional Contribution

  A type of supplemental contributions in EPF and DB plans other than the special contribution to improve the financial status of the plan. This contribution is made when the underfunding occurs before the next revaluation of the plan and it needs to be amortized, or when the additional contribution is required by non-ongoing basis.

ナ行

ハ行

• 非継続基準 | Non-ongoing Basis

  A method of examining the financial status of pension plan to see if the minimum funding requirement is met on the assumption that the plan is dissolved or terminated as of the valuation date. If the minimum funding requirement is not met, the plan must prepare a recovery plan to improve the funding status.

• 賦課方式 | Pay-as-you-go Method

  Financing method in which no assets are built up in advance and contribution revenues are directly used to finance current pension payments. Generally speaking, most public pension systems are financed this way. Opposite: Advanced Funding Method.

• プラスアルファ部分 | "Plus α" portion

  A top up portion on the basic part of the EPFs. All EPFs are required to provide additional 10% or more of the contracted portion as a top up benefit. EPFs established after 2005 are required to provide more than 50% of the contracted portion.

• フルファンディング | Full Funding

  The funded status where plan assets equal actuarial liability (actuarial reserve). When transferring DB plan or TQPP to a DC plan including the past service portion, the preceding plan must be fully funded.

• 平均残存勤務期間 | Average Remaining Years of Service

  Expected years that existing employees may serve in the future. It is calculated using a turnover rate and mortality rate, and has impact on amortization period of PSL and actuarial gains/losses as well as a discount rate.

• 閉鎖型年金 | Closed Pension Fund

  A pension fund which is limited to beneficiaries only. If the plan is a trust contract, the contributions are recalculated regularly after the fund is closed; on the other hand, if it is a life insurance contract, the difference between the actuarial reserve calculated with guaranteed interest rate and the plan assets is paid in to the plan at once when switching to a closed fund, and no further contribution is required.

• 別途積立金 | Voluntary Reserve

  In EPF and DB, any surplus at the fiscal year end is reserved and deficit is carried over whereas in TQPP there is no notion of surplus and if there is a surplus at a plan revaluation, the surplus is returned to the employer.

• ポイント制 | Point based plan

  A type of retirement benefit formulas. Usually monthly or annual points are granted and accumulated based on years of service, job grade, title, appraisal etc. over service and multiplied by unit price to calculate the terminal benefits.

• ポータビリティ | Portability

  Ability to roll over retirement assets from one scheme to another in order to totalize the service period for annuity payments. In Japan, whereas the DB plan assets can be moved to DC plan, DC assets cannot be rolled over to DB plans, and TQPP does not have this portability function at all.

マ行

• 前払年金費用 | Prepaid Pension Cost

  When the amount subtracting plan assets and unrecognized actuarial gains/losses, unrecognized PSL and unamortized transition obligation from the benefit obligations is an asset (in another word if the accrued pension cost becomes negative), it is recorded on the balance sheet as asset.

• 未積立退職給付債務 | Unfunded Benefit Obligations

  The difference between the benefit obligations and plan assets.

• 未認識債務 | Unrecognized Liabilities

  The amount unrecognized in the unfunded benefit obligations and is composed of unrecognized PSL, unrecognized actuarial gains / losses and unamortized transition obligations.

• 免除保険料 | Exempt Premium

  As the EPFs contract out of the social insurance, the employers and employees who are members of EPFs are exempt from paying the designated Employee Pension Insurance premium to the government and pay it to the EPF instead.

ヤ行

• 予定死亡率 | Mortality Rate

  Probability of dying during service or after retirement, and is rationally calculated based on the national life table.

• 予定昇給率 | Salary Increase Rate

  Rationally calculated based on the salary rules, average salary distribution, actual experiences etc. of a company. A structural basic pay raise is not counted unless it can be reasonably projected.

• 予定退職率 | Turnover Rate

  Probability of retiring or leaving. Calculated rationally based on the past experiences excluding such irregular events as redundancy etc.

ラ行

• 利息費用 | Interest Cost

  The interest to accrue on the benefit obligations of the beginning of the year during the period, and is calculated by multiplying a discount rate by the benefit obligations at the beginning of the year.

• 累積給付債務 | ABO

  Accumulated Benefit Obligation. A pension liability calculated using the Unit Credit Method. Generally speaking, PBO minus expected payments equals to ABO. In some cases where benefits are fixed, ABO may equal to PBO.

• 連合設立 | Affiliated-employer EPF

  A type of Employee Pension Funds established by group companies. One of the group companies must possess directly or indirectly approx. 20% of the issued shares of other affiliates, or must have a high level of transfer of human resources with the affiliates. The establishment of a fund requires minimum 1,000 employees.

ワ行

• 割引率 | Discount Rate

  Retirement benefit obligations and service cost are discounted back to the present value, and the interest rate used in those calculations is the discount rate. The discount rate is determined based on the yield as of the fiscal year end on long-term bonds with low risk over average remaining years of service.

英数字

• 1.57 Shock

  Total fertility rate dropped to 1.57 in 1989, which marked the lowest in history and shocked the nation as the rate was even lower than in 1966, the year of hinoe uma.