Forget the fiscal cliff for a moment, if you can, as there's bigger issues afoot. For instance, the perfect storm of low interest rates and long-term financial uncertainties that has also served to severely impact America's DB plans, to record levels.
As the Wall Street Journal reports, those factors have contributed to an all-time record funding hole for the largest corporate pension plans in the United States. Milliman Inc.'s research shows that the underfunded level hit $453 billion at the end of September, at least a 30 percent increase in unfunded obligations from a year before.
Record-low interest rates are creating a vicious circle for the pension business: Not only are their various investments earning next to nothing, further increasing that deepening pension pit, companies' discount rate - used to compute present value of their future pension liabilities – is based on corporate bond rates, which are also bottoming out, drastically increasing the level of liabilities.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.