Andy the Actuary Posted February 22, 2015 Share Posted February 22, 2015 It wasn't so long ago that interest rates meant interest was being paid. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice. Link to comment Share on other sites More sharing options...
My 2 cents Posted February 23, 2015 Share Posted February 23, 2015 What, 0.15% not enough for you? Always check with your actuary first! Link to comment Share on other sites More sharing options...
Tom Poje Posted February 23, 2015 Share Posted February 23, 2015 that was about the time I started in the business. the one actuary called me in his office, and said the IRS agent had asked him to justify using something like 9% interest in the DB plan. Way too high. The actuary pointed to the assets (over the last 3 years or so) and said "based on this, I should be using something closer to 15%" and that ended that conversation. Link to comment Share on other sites More sharing options...
ESOP Guy Posted February 23, 2015 Share Posted February 23, 2015 Tom I don't remember the issue of too high being the big deal back then but too low assumed rate of return. I remember my first job from college in 1986. I worked for the IRS. I got a small dr office Sch C to audit. The thing that stood out was the huge pension deduction he was taking. I knew nothing back then about qualified plans at all. So I asked some questions and the thing that stuck out to me was the actuary was assuming a 5% return. This was back when a passbook paid 5.25% and simple money markets were paying close to 8%. I was told by my boss I had to take my objections to the IRS group that handled retirement plans. I was told by them to forget it they just took the actuary's word for it when it came to the assumed rate of return. I went to work shortly after that with a TPA that did both DC and DB work. Every DB plan they had assumed a 5% rate of return. I seem to recall a few year later the IRS did in fact start to question the 5% ROR and the assumptions went up and the people's deductions started to go down. Link to comment Share on other sites More sharing options...
FAPInJax Posted February 24, 2015 Share Posted February 24, 2015 Not quite. Actuaries still assumed 5% and then the IRS started their infamous audit program where they believed that 'all' plans should be using 8%. You could show them a Dr plan (they are famous for thinking that they are good investors <G>) where the plan did not have a positive rate of return for the last 5 years and the IRS still wanted to assume 8%. [The IRS ultimately lost the battle but the start of the attacks on DB plans had only just begun] Link to comment Share on other sites More sharing options...
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