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Posts Tagged ‘pensions

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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OPEB Obligation Abatement

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OPEB Obligation as percentage of PBO - 2014 all (205)During 2014, obligations for other post-employment benefits (OPEB) provided by U.S. corporations continued to decline relative to projected benefit obligations (PBO) for defined benefit pension plans. Pension PBO itself is a moving target — although remeasurement at lower interest rates at the end of 2014 led to sharp increases in PBO, the aggregate global PBO continues to fade due to accrual freezes implemented by many pension plans. Even so, curtailment of retiree health benefits and other retiree benefits has been more sweeping than the pension freezes, cutting aggregate global OPEB liabilities to less than half the level measured a decade ago.

This chart shows aggregate global results for OPEB expressed as a percentage of PBO for 205 U.S. companies for fiscal years ending in 2000 through 2014. Don’t expect the current trend to ever reverse: eventually non-pension retiree obligations shouldered by employers will dwindle to little or nothing, leaving those responsibilities entirely to Medicare and the individual.

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Written by macheide

11 March 2015 at 5:04 pm

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2014 Pension Asset Return — Expected v Actual

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Pension Asset Return - Expected v Actual - 2014 all (205)During 2014, investment returns on assets of defined benefit pension plans exceeded the expected asset returns for the 3rd consecutive year. Pension asset returns have been positive for the past 6 years since the huge losses of 2008.

This chart shows aggregate global results for the pension plans of 205 U.S. companies for fiscal years ending in 2000 through 2014. Solid blue circles indicate expected asset returns included as a component of net periodic pension cost. Open red squares indicate actual investment results.

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Written by macheide

5 March 2015 at 6:45 am

Posted in άctuary

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Pensions & Other Post-Employment Benefits 2014

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10-k Annual Reports for Corporate Fiscal Years Ending through 1/31/2015
(with January fiscal years treated as corresponding to preceding calendar year)
– number examined as of 4/1/2015 — 275 –

Charts and Commentary —

(* — pending update, previous data set as of 2/28/2015 being used)

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Written by macheide

1 March 2015 at 1:31 pm

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What’s Wrong with This Picture?

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Pension Contrib v Cost 2014 dec 100
 

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Written by macheide

22 February 2015 at 9:27 am

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Pension PBO Funded Ratio for Quarterly FY Groups

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PBO FR quarterly FY groups 2014

Most public U.S. corporations use a calendar fiscal year (FY), ending on or around December 31. But although distinctly in the minority, a material group use fiscal years ending in every other month of the year — on or around January 31, on or around the end of February, on or around the end of March, and so on. Since accounting for pension plans generally rely on spot measurements as of the close of a fiscal year, and since asset experience and discount rates and other measurement factors can be very volatile during the course of a year, appraisal of the full universe of pension plans must take account of the different fiscal years.

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Written by macheide

14 February 2015 at 5:28 pm

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Pensions PAYG Benchmark

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Pension Benefits v Contributions 2014 nov-dec (54)Very early on the education of a pension actuarial student encounters the pay-as-you-go (PAYG) “funding” method, under which contributions simply equal benefits. Except for the occasional reference to our Social Security system, which is basically run on a PAYG basis, the student then leaves the method behind for the majority of practice. Except for nonqualified deferred compensation plans for executives, numbers for which are a material piece of the pension numbers reported on corporate financial results — since those plans are unfunded, their contributions are made on a PAYG basis. In fact, during periods when companies have been on a “contribution holiday” for their qualified pension plans due to previous advance contributions (e.g., as was recently the case for GM), their domestic pension contributions are comprised entirely of PAYG amounts paid to their nonqualified deferred comp programs. Aside from those actual PAYG amounts, the PAYG basis offers a useful benchmark for assessment of total contributions made to all pension plans sponsored by an employer.

This chart shows results for 54 public U.S. employer with 2014 fiscal years ending in the 4th quarter of 2014 that have released their 2014 annual financial statements by 13 February 2015. For those companies, the chart shows aggregate pension benefits paid (smooth higher orange line) and aggregate employer contributions to pension plans (volatile lower blue line) for fiscal years 2000 through 2014.

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Written by macheide

14 February 2015 at 4:26 am

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