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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: orkrious who wrote (206171)11/21/2002 9:01:35 PM
From: mishedlo  Read Replies (1) of 436258
 
Pension obligations.
prudentbear.com

Reaper, does this make sense? 1% drop yields 8% funding requirement

When companies with giant pension plans are figuring plan liabilities, they use an interest rate to discount back future obligations to the present. Guess what? Low interest rates, i.e. low discount rates, make the present value of the obligation larger. So for companies with big pension plans, there is only one thing to do: Lobby! According to BenefitNews, companies are asking lawmakers to change the benchmark from the 30-year Treasury to something with more yield to it. It seems that every 1% drop in the 30-year Treasury rate hikes funding requirements by 8% to 20%. Also, plans with lump benefits are seeing those payouts rise, encouraging cash outs over annuities.
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