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Disclosure & Budgeting
The disclosure and budgeting tool lets you quickly determine the likely effect of
market changes on the information you will disclose to shareholders at the end of
the year. The graph below compares a plan's end of year funded status with its beginning
of year funded status.
This tool also provides estimates of next year's accounting expense and funding
contribution.

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Financial Sensitivities
The Financial Sensitivities tool compares two forecasts (baseline vs. scenario)
of a plan using different investment return, inflation, and interest rates. Forecasts
can highlight upcoming events and allow you to take action now before they become
surprises. For example, a plan on a contribution holiday ($0 contributions) might
learn that a contribution might be necessary in the next 5 years if investment return
is poor or inflation is high.
The graph below compares a 5 year forecast of contributions with baseline assumptions
against an alternative scenario.

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Asset Allocation
The plan's asset allocation is one of the most important, if not the most important,
decision that the plan sponsor makes. While it is true that alternative actuarial
assumptions and cost methods can have a significant impact on current year costs
and the incidence of costs over time, they have no permanent impact on the economics
of the pension plan. The asset allocation, on the other hand, has a direct impact
on such economics. For example, the graph below compares the expected funded ratio
of a plan in 5 years under 3 alternative asset mixes.

Choosing an asset allocation, or mix, that is right for your plan can be overwhelming
because there are literally an infinite number of choices. However, we can narrow
the field by throwing out mixes that are "inefficient." That is, mixes
that produce a lower return than another mix with the same risk (or equivalently,
mixes that have a higher risk than another mix with the same return). The remaining
mixes comprise what is known as the Efficient Frontier. Plotting the efficient mixes
by their standard deviation and return, we get something like this:

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