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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: reaper who wrote (145943)1/24/2002 2:29:36 PM
From: yard_man  Read Replies (1) of 436258
 
>>. IF the pension consultant was to cut equity exposure to say 40% from 60%, THEN the pension actuary would in tandem be forced to cut the expected returns on assets from say 9.5% to 8.5%. BUT by cutting the expected return, the corporation would all of a sudden have an under-funded plan which would (i) force huge cash contributions; and (ii) really hurt earnings.
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But at some pt -- in a bear market they have to recognize that LT returns have moved away from actuarial predictions -- not just to the extent that they need to allocated more to be in compliance -- but that it isn't working, then what? They have to adjust the formula, do they not? How does that work, reaper? Thanks for the info.
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