This is a dossier with resources and material regarding the valuation of defined benefit pension plans.
Pension Plan Calculator (spreadsheet provided by aliactuary.com)
Actuarial Methods and Assumptions used in the Valuation of Retirement Benefits in the EU and other European countries
Defined benefit audit techniques –
Robert Meegan (Northeast) a
Dave Harstein (Northeast), and Donna Prestia (CE&O), Reviewers
Stress Tests for Defined Benefit Pension Plans – A Primer – Gregorio Impavido
An Economist article on US public pension plans – Buttonwood
“Final salary pensions are a debt-like obligation, particularly in the public sector where the rights of pensioners are established in law (and even the constitution) in some states; there is an interesting case going on in Stockton, California, which may set the rights of creditors against those of pensioners. On corporate balance sheets, pension liabilities are discounted with a corporate bond yield. Falling bond yields have pushed up liabilities and widened deficits; hence many corporates have switched to defined contribution schemes. (Of course, the problem of low returns and falling rates dogs those schemes too, and are made worse by the low level of contributions that are made.)
This is NOT just a theoretical issue. If a company wants to offload its pension promise, or an individual wants to secure his pension by buying a fixed annuity, they find the cost has risen substantially.
But this doesn’t show up in the public sector. It uses the expected rate of return to discount its liabilities; since the expected rate of return is higher (7.5-8% is standard) than bond yields, it makes the liabilities look smaller, and reduces the apparent cost to taxpayers. The rationale for this approach is that pension funds can afford to take a long-term view and benefit from the returns on risky assets; contributions can be smoothed over the long term, avoiding any sudden jumps in employer (taxpayer) payments.”