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This paper considers first the media available to fund a variable annuity for an individual, and then the additional media available to fund variable annuities for groups under pension plans, profit sharing plans and tax-sheltered annuity programs. Finally it studies some of the considerations in selecting a particular funding medium. The study focuses its attention on annuities involving life contingencies, but also treats perpetuities and annuities for a definite period of years. It deals with media to fund annuities varying with a cost-of-living index, a wage index or a mathematical formula, as well as annuities related to equity prices. Although variable annuities of some types have existed for centuries, the modern development of variable annuities in the United States began in 1952, when Teachers Insurance and Annuity Association, Long Island Lightning Company and Chemstrand, Inc., all established variable annuity pension programs. In the fifteen years since then a wide variety of media have developed for funding variable annuities. These media are the financial institutions and legal instruments through which the annuities are funded. George E. Johnson, A.B., LL.B., C.L.U., F.L.M.I., joined Metropolitan Life on September 1, 1967 as a consultant on group variable annuity plans. Mr. Johnson was formerly vice-president and general counsel of Teachers Insurance and Annuity Association and of College Retirement Equities Fund; he was the first president of Equity Annuity Life Insurance Company and Variable Annuity Life Insurance Company, and was acting president of the National Health and Welfare Retirement Association. Donald S. Grubbs, Jr., B.S., F.S.A., is an independent consulting actuary with offices in Philadelphia. Before establishing his own offices, Mr. Grubbs was associated with John B. St. John, Consulting Actuary, and prior to that he was employed by Warner-Watson, Inc., Consulting Actuaries, and by the New England Mutual Life Insurance Company. He has actively worked with a variety of variable annuity pension plans for the past eight years. This paper summarizes the results of a study of the funding media that have developed. It considers first the media available to fund a variable annuity for an individual, and then the additional media available to fund variable annuities for groups under pension plans, profit sharing plans and tax-sheltered annuity programs. Finally it discusses some of the considerations in selecting a particular funding medium. The study focuses its attention on annuities involving life contingencies, but also treats perpetuities and annuities for a definite period of years. Most of the media discussed may be used only for annuities related to equity prices, but media to fund annuities varying with a cost-of-living index, a wage index or a mathematical formula are also considered. Individual Variable Annuities All annuities may be classified by the period during which annuity payments continue. First are perpetuities under which the payments continue perpetually, or indefinitely into the future. Second are annuities payable for a certain period not related to the length of life. Third are This paper was given at the 1967 Annual Meeting of A.R.I.A.

The authors find high but diminishing marginal returns to investment in expenditures per pupil per year. The study suggests the desirability of increased educational quality in school districts with lower per pupil expenditures so as to equalize the returns to years and annual expenditure per student. (Necessarily, there should be optimization in the way inputs are combined as the school systems move to new output levels-consolidation being a pertinent example.) Since expenditure per student also affects years of schooling attained, a policy of improving the relative quality of school systems in poverty areas may partially offset inherited economic disadvantages.