When it Comes to Pension Reform, Focusing on an ‘Ideal’ Assumed Rate of Return Misses the Mark

As some pension plans across the country continue to struggle with growing unfunded liabilities, we hear a lot these days about pension reform.  One common topic these reforms address is the assumed rate of return used in calculating the fund’s required contribution rate.  While it is imperative that all assumptions used in the calculation of an employer’s pension cost are reasonable and reviewed periodically, it seems that blaming a fund’s chosen rate of return for any funding shortfalls is probably missing the mark.

While policy makers continue to grapple with the question of what is a ‘realistic’ or ‘ideal’ investment assumption, a pension plan experiencing funding difficulties is likely less because of the actual assumption and more the result of not consistently making the required contributions, or failing to adjust the contribution rate when plan experience doesn’t meet the assumptions. 

Tagged reform, Investment Assumption

Realistic Expectations for Investment Returns Are Vital for Pension Funding

Tagged discount rate, Employers, Investment Assumption, Investment Return, Investments, Members, Prospective Members, Retirees

LAGERS Shares Success Strategies of Best U.S. Plans

Tagged Contributions, Employers, Funding, Investment Assumption, Members, Prospective Members, Retirees

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