Pension accounting: ASC 715 discount rate selection
Pension accounting research series releases disclosures for 2023.
Insight
Pension accounting: ASC 715 discount rate selection
Disclosures for 2023
Now that 2023 has closed and indices can be updated through year-end, there are changes in long bond yields from December 31, 2022 to December 31, 2023. The figure below shows those changes.
| Change in yields, year end 2022 to year end 2023 | |||
|---|---|---|---|
| Bond index | Dec. 2022 yield | Dec. 2023 yield | Change (BPS) |
| Bloomberg AA Long Credit | 5.08 | 4.82 | -26 |
| FTSE Pension Liability Index1 | 5.02 | 4.83 | -19 |
| FTSE Pension Liability Index -Intermediate2 | 4.99 | 4.80 | -19 |
What does this mean?
Yields are lower at all durations over one year with the reductions of less than 30 bps. Based on our analysis, plans with a December 31 measurement date should expect slight decreases in their effective PBO discount rate, typically by approximately 20 bps for most plans, except in extreme circumstances where a liability is overwhelmingly weighted to payments in the first year of the payout projection.
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Information provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company.
1 Financial Times Stock Exchange (FTSE) Pension Liability Index has a duration as of Dec. 31, 2023 of 17.8 years and the index represents a fully-open plan.
2 Financial Times Stock Exchange (FTSE) Pension Liability Index Intermediate has a duration as of 1Dec. 31, 2023 of of 14.0 years and the index represents a plan that is closed to new entrants.
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