Are any auditors pushing back?

[tuni88]

We want to use 6% as our 12/31/06 discount rate for our pension plan. I keep hearing that 5.75% is the rate likely to raise the fewest eyebrows, if any. Anybody using 6% with no push back from auditors?

[Blinky the 3-eyed Fish]

I think you will find that the rate acceptable depends on the auditor.

[AndyH]

Blinky, is that an answer, a non-answer, or a non-answer answer?

I have not heard anybody (yet) taking issue with 6%. Oops.

[tuni88]

I think you will find that the rate acceptable depends on the auditor.

Yeah, I know. I'm not interested in shopping around for an auditor who will say 6% is acceptable. Our auditor is our auditor - I want to know if I can push back when he says 5.75% ought to be the rate. Does anyone have a feel for how auditors, in general, are reacting when 6% is proposed to them?

[Effen]

Although I know you all know this.... the discount rate should be based on the yield curve for your particular plan's demographics. Therefore, if the auditor's "push you" on your discount rate, you need to be prepared to say something other than "that’s what they said on Benefitslink". If you are concerned, do a quick yield curve analysis and see where it comes out.

If you want a simplified approach, and if your auditors buy into it, the Moody's AA rate on January 1, 2007 is 31 bpt higher than is was on January 1, 2006, therefore moving your discount rate up 25-31 bts should be acceptable. However, keep in mind, FASB is very clear that simply looking at the Moody's rate is not sufficient.

[AndyH]

True enough.

FASB is also clear that if the government does not cause DB plans to become extinct, they will.