Wednesday, July 23, 2014

Financial Issue for U.S. Employers: New Actuary Tables May be 'Nail in the Coffin' for Defined Benefit Plans

  • The measured value of liabilities for most defined benefit plans will increase between 3% and 8% with the adoption of new mortality tables, said a report from Wilshire Consulting.
  • The tables, released by the Society of Actuaries in exposure draft form in February, reflect an increase in the life expectancy of Americans, resulting in increased pension plan liability values and liability durations.
  • The tables most DB plans now use to measure pension liabilities were published by the Society of Actuaries in 2000. 
  • The mortality assumption changes were anticipated even before the tables were released, leading some plan executives to raise their ending funding ratios for glidepaths to 110% and 115%. 

Source: Meaghan Kilroy writing for Pensions & Investments.