Actuarial Reserve for Accumulated Leave Benefits (GCR) with Enhanced Mortality and Interest Rate Modeling

Nur Idayu Ah Khaliludin; Haslinawati Mohd Mustapha; Nur Ilyana Ismarau Tajuddin; Muhammad Nuruddin Sudin

doi:10.33102/mjosht.537

Authors

Nur Idayu Ah Khaliludin Tamhidi Centre, Universiti Sains Islam Malaysia, 71800 Nilai, Negeri Sembilan.
Haslinawati Mohd Mustapha Tamhidi Centre, Universiti Sains Islam Malaysia, 71800 Nilai, Negeri Sembilan.
Nur Ilyana Ismarau Tajuddin Tamhidi Centre, Universiti Sains Islam Malaysia, 71800 Nilai, Negeri Sembilan.
Muhammad Nuruddin Sudin Centre of Foundation Studies, Universiti Teknologi MARA, Cawangan Selangor, Kampus Dengkil, 43800 Dengkil, Selangor.

DOI:

https://doi.org/10.33102/mjosht.537

Keywords:

Actuarial reserve, Accumulated leaves benefit, Mortality risk, Net Present Value (NPV), retirement

Abstract

The 2023 Malaysian Budget increased the maximum compensable unused leave for public employees from 160 to 180 days, significantly raising future liabilities for public sector employers. Under the Malaysian Private Entities Reporting Standard (MPERS), universities must recognise these benefits, which are payable upon retirement or death, as actuarial liabilities. Existing tools, such as the Jabatan Perkhidmatan Awam (JPA) calculator, offer limited accuracy as they do not account for mortality risk or interest rate fluctuations. This study introduces an enhanced actuarial reserve model that incorporates both uncertainties. The model considers two payment casesw which are upon retirement and upon death, using survival probabilities, interest discounting, and assurance factors to determine the expected present value of future cash awards. To evaluate model performance, a simulation study using a non-parametric bootstrap is conducted on 5,000 simulated employee records. Bootstrap resampling is repeated at increasing levels to measure bias and consistency. Results show that both bias and variance decrease as bootstrap iterations increase, indicating model stability and accuracy. This improved model offers a more realistic and reliable method for estimating future cash awards, ensuring better financial planning, policy compliance, and reserve adequacy for higher education institutions.

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