Andy the Actuary 60 Report post Posted February 22, 2015 It wasn't so long ago that interest rates meant interest was being paid. Share this post Link to post Share on other sites
My 2 cents 289 Report post Posted February 23, 2015 What, 0.15% not enough for you? Share this post Link to post Share on other sites
Tom Poje 402 Report post 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. Share this post Link to post Share on other sites
ESOP Guy 488 Report post 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. Share this post Link to post Share on other sites
FAPInJax 4 Report post 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] Share this post Link to post Share on other sites