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2012 Study of Economic Assumptions


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Under the FASB Accounting Standards Codification (ASC), the sponsor of a defined benefit pension plan is required, in measuring the plan's obligation and annual expense, to use assumptions that are explicit and consistent to the extent that each reflects expectations of the same future economic conditions. In general, the benefit obligation is most sensitive to the discount rate assumption; for example, a relatively small change in the discount rate could result in a change in the liabilities of perhaps as much as 5 percent.

Deloitte Consulting LLP’s 2012 Study of Economic Assumptions compiled information disclosed by many of the Fortune 500 companies in their most recent annual reports. The survey focused on 267 companies who sponsor pension or other post-retirement benefits and have calendar fiscal years. Of these, 262 companies disclosed information about defined benefit plans; 235 disclosed information about OPEB (subject to ASC 715-60), including five companies that disclosed only OPEB arrangements. The disclosure information also included assumptions the companies used as of the prior year, equipping us to compare changes in the assumptions from one year to the next.

Specifically, we discuss:

  • Prevailing interest rates
  • Measurement date
  • Discount rate assumption
  • Salary increase assumption
  • Expected return assumption
  • Health care cost trend rate assumptions

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