FASB discount rate

[Dinosaur]

We are preparing a June 30, 2010 FASB valuation (we are the actuarial firm). We used a 6% discount rate for the 6/30/2009 FASB valuation. This seems quite high now looking at the FAS 87 moody rates published on this board. We need to discuss the discount rate with the client and the auditor but it seems that a rate around 5.5% is reasonable. Any thoughts?

[Andy the Actuary]

FASB discount rate is established by the client and auditor. Would urge that you do not recommend.

[david rigby]

Here are a few prior discussions that you may find useful:

http://benefitslink.com/boards/index.php?showtopic=44578

http://benefitslink.com/boards/index.php?showtopic=40213

http://benefitslink.com/boards/index.php?showtopic=38186

[Effen]

Agree w/ ATA, but recognize the actuary is often asked for a reasonable suggestion.

When determining what discount rate might be reasonable, you should be looking at the yield curve, not necessarily the AA rate. Plot the anticipated benefit payments on the yield curve (not necessarily the PPA yield curve) http://www.soa.org/professional-interests/...es-pension.aspx and determine a composite rate (like a PPA effective rate) and that should be close to a reasonable discount rate. (+-.25 bps).

But as Andy stated - your's is just a suggestion, the client/auditor have the ultimate authority.