Asset Smoothing Methods

[david rigby]

Any actuaries out there already planning a greater use of smoothing methods in light of the recent market activity?

[Guest Jim Hunzelman]

Yeah, I used it on 6-8 plans for the 2000 valuation (beginning of year valuation) where it seemed to make sense. What I was seeing on these plans was up to 100% gain in 1998 followed by 50% loss in 1999. I suspect I may use it on more plans in the future with the market fluctuations we have been seeing.

[David MacLennan]

Yes, I too have used smoothing in half a dozen or more plans where it was advantageous.

[david rigby]

The particular situation I am focusing on is plan years which begin October 1. A smoothing method adopted for 2001 valuation might be advantageous, especially if the plan year begins 10/01. However, the PBGC unfunded liability for variable premium must use the "same actuarial assumptions and methods" as used to determine the minimum funding contribution for the prior plan year. (Quote from 2001 PBGC premium package, page 28.)

Is anyone contemplating revising 2000 valuations, using a smoothing method, so that you can use that smoothing method to determine the PBGC variable premium for the plan year beginning in 2001?

[GBurns]

pax's post raises the question of what periods did the prior posters smooth?

I got the impression that they smoothed only 1 year with a method applied for that 1 year only and did not bring into play the "same actuarial assumptions and methods" used in the proir year.

How was the smoothing accomplished and applied?