9: Bond yield hits plans.(pension plan interest rate effects)(Brief Article)

Business Insurance, December, 2001 by Geisel, Jerry

Employers with defined benefit pension plans will pay dearly as a result of this year's plunge in U.S. Treasury bond interest rates. Next year, employers will have to pump tens of billions of extra dollars into their pension plans, not because the plans are less secure but solely due to a federally mandated way of calculating the liabilities on which contributions are based.

Under a 1994 law, employers are required to value pension liabilities using a four-year weighted average of the yield on 30-year Treasury bonds. Those bond yields in recent years have been declining in recent years as the as the federal government has paid down its debt. And rates took a further tumble in October when the Treasury Department said it would not be issuing new 30-year...

Read the rest of this article with a Free Trial at HighBeam Research.

Premium Content Partnership | HighBeam Research provides an in-depth online archive library of reference works.