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Measuring Pension Obligations: Discount Rates Serve Various Purposes (PDF)
American Academy of Actuaries Link to more items from this source
Nov. 21, 2013

"The solvency value, a market-based measurement, determines an amount that a pension plan needs to invest in default-free securities to provide the benefits with certainty. The budget value, an expected return-based measurement, determines an amount that will be sufficient to provide benefits if the portfolio earns the expected return on assets. The difference between the two represents the gain the sponsor anticipates by taking on risk in a diversified portfolio. Plans funded at the budget level and invested in a diversified portfolio are likely to experience either insufficient or surplus assets, and benefit security is affected by the plan sponsor's ability to make additional contributions if an adverse investment experience materializes."

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