Corporate pension plan sponsors might finally have good news to consider as they set the discount rate they will use to determine the value of their liabilities, a research study by SEI said.
The 12th annual study, which analyzed a database of 688 pension plans, said the rise in interest rates since the start of 2013 gives plan sponsors a break from years of low rates. Higher rates cause the discount rate to go up and liabilities to shrink.
"Plan sponsors that have struggled with setting the discount rate for several years will finally see some relief as we end 2013," said Jonathan Waite, director, investment management advice, and chief actuary for SEI's Institutional Group. "Discount rates increasing 90 [basis points] will lower liabilities … which is welcome news after years of steadily falling rates."
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