Falling bond rates inflate DB plan liabilities

Employee Benefit News, December, 2001 by Craig Gunsauley

Low interest rates are substantially inflating government-mandated liability calculations for defined benefit plans, leading employer groups to press Congress for a fix.

Pension plan sponsors are experiencing rapidly growing liabilities in their plans due to a continued fall in the 30-year Treasury bond yield used to calculate minimum funding requirements for the Pension Benefit Guarantee Corporation (PBGC) and current liability rates for the IRS.

T-bond prices were rising steadily, and yields declining correspondingly, after the government sharply curtailed new issues to avoid crowding out corporate securities. On Oct. 31, officials announced that the long bonds would no longer be issued.

Employer groups are now asking Congress to substitute a benchmark...

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