fas 158

[Gary]

a one participant plan has to prepare fas 158 reporting (they have government contract work and the government is requiring this).

The participant is expected to take lump sum in 5 yrs (NRA).

I looked at the monthly spot rate yield curve for high quality corp bond rates and determined that as of 12/31/2010 the yiled with a 5 yr maturity is about 3%.

Would this make sense as an appropriate discount rate for the 2010 net periodic pension cost calculation?

thanks

[SoCalActuary]

Your scenario creates a reasonable expectation that the lump sum will be paid in 5 years, but I personally think your discount rate may be too low. Under these facts, it makes very little difference, since the lump sum is not determined on the 3% rate.

Ultimately, you prepare this for the client's financial statement, and the auditor has the responsibility to comment on it. With that in mind, I discuss the rate with the client in advance and let the auditor know what my intent is.

Then, they have the ability to push back.

[Gary]

Of course looking at the yields in 2010 with a 5 yr maturity I could justify 3.5%, but what type of discount rate might you support?

I realize 3.5% looks a bit quirky low, but I am just citing the monthly yield curve at the maturity dates.

It is a good suggestion to discuss with client as you say.

thanks