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Archive for March 20th, 2015

Pensions — Discount Rate v Expected Return

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Pension Plans - Discount Rate v Expected Return - 2010-2014 Q4 (200)For the close of 2014, the discount rate used to measure obligations under defined benefit pension plans dropped back to 2012 levels, after increasing for 2013. The lower red line of this chart shows average discount rates used at the close of fiscal years ending in 2000 through 2014 for the pension plans of 200 U.S. corporations with fiscal years ending in the 4th quarter of the calendar year. That drop in the discount rate for 2014 is the most significant factor in the drop in the aggregate funded ratio of pension plans, as discussed in 2014 Pension PBO Funded Ratio, since the actuarial losses arising from remeasurement of pension obligations with the lower discount rates more than offset gains experienced by the pension assets. As discussed in Pension Cost — All v Traditional, the drop in discount rates is also the principal factor in the increase for 2014 in the aggregate pension costs, since the actuarial losses arising from obligation remeasurement for the small subset of employers now choosing immediate recognition of gains and losses more than offsets the decrease in pension cost that most companies were reporting for 2014.

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Written by macheide

20 March 2015 at 11:12 am

Posted in άctuary

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