ABSTRACT
Besides the usual pension bene ts, the pension plan of a rm may be forced by law in some countries to o er wage-based lump sum payments due to death, retirement, or dismissal by the employer, but no payment is made by the employer when the employee resigns. An actuarial risk model for funding severance payment liabilities is formulated and studied. e yearly aggregate lump sum payments are supposed to follow a classical collective model of risk theory with compound distributions. e nal wealth at an arbitrary time is described explicitly including formulas
for the mean and the variance. Annual initial-level premiums required for “dismissal funding” are determined and useful gamma approximations for con dence intervals of the wealth are proposed. A speci c numerical example illustrates the nonnegligible probability of default in case the employee structure of a “dismissal plan” is not well balanced.
