2021: Disclosures for 2020

SEI released research on assumptions for ASC 715 (pension accounting) valuation that was based on information available through the end of 2020. Now that the year has closed and indices can be updated through year-end, there are changes in long bond yields from December 31, 2019 to December 31, 2020. The updated figure below shows those changes.

FIGURE 1.1 (UPDATED) CHANGE IN YIELDS, YEAR-END 2019 TO YEAR-END 2020Figure 1.1 (Updated)

What does this mean?

Yields are lower at all durations with significantly larger decreases at short maturity periods (for the first 12 years). Based on our analysis, plans with a December 31st measurement date should expect significant decreases in their effective PBO discount rate, typically by approximately 70-75 bps and in many cases more, particularly for plans with short duration liabilities.

Questions

If you are an SEI client and have any additional questions, please contact your SEI Client Portfolio Manager or Jon Waite at jbwaite@seic.com or (610) 676-3493. All other inquiries can be sent to seiresearch@seic.com.

Legal Note

1 Financial Times Stock Exchange (FTSE) Pension Liability Index has a weighted average life (WAL) of 21.7 years and the index represents a fully-open plan.
2 Financial Times Stock Exchange (FTSE) Pension Liability Index Intermediate has a weighted average life (WAL) of 17.4 years and the index represents a plan that is closed to new entrants.
Information provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company.