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  #1  
Old 06-20-2011, 10:32 PM
Mark Cavazos Mark Cavazos is offline
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Default EIR under Full Yield Curve

I was looking at an SB. The plan had more than 500 participants with actives and retirees. It looked pretty normal.

The 1/1/2009 valuation used the full yield curve with November as the applicable month (October curve). The description said that the rates began with 5.45% and ended with 6.63%. (For comparison, the segment rates were 5.51%, 6.25%, 6.48% - so this looks reasonable.)

The effective interest rate for the full yield curve was 8.10%. Is that reasonable?

I have only used segment rates, so I do not know if this is a common occurance.
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Old 06-21-2011, 08:16 AM
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An effective rate above 8% was common for full yield curve valuations using the October 2008 rates. The rates peaked at 8.89% for 12 year maturities and was above 8 for everything from 4 years to 21.5 years. (Look at the full yield curve on the IRS site.) IMHO, allowing this was one of the dumbest things ever for pension valuations, but it did buy an extra year of delay before plans had to take a big hit for underfunding as a result of asset devaluations. I think that many plans thought that rates would bounce back up and asset values would also come back before they had to actually pay the piper for the contribution holidays they took...2009 was a big hit for those that took this route.
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Old 06-21-2011, 09:23 PM
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I'm with fuzzy (never thought I'd write those words). Look at the yield curve, that's a common EIR for 2009.
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Old 06-22-2011, 09:23 AM
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Quote:
Originally Posted by BadBeatMe View Post
I'm with fuzzy (never thought I'd write those words).
Should I feel complimented or insulted?or are you just commenting on my id?
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"We created an environment where we didn't know what we were doing, but it was legal and making profits."(Bill Sharon, chief executive of Sorms)
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Old 06-22-2011, 11:01 PM
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Quote:
Originally Posted by Fuzzy View Post
Should I feel complimented or insulted?or are you just commenting on my id?
Just commenting on your id.
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Old 06-23-2011, 11:20 AM
Rball4 Rball4 is offline
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Quote:
Originally Posted by Mark Cavazos View Post
I was looking at an SB. The plan had more than 500 participants with actives and retirees. It looked pretty normal.

The 1/1/2009 valuation used the full yield curve with November as the applicable month (October curve). The description said that the rates began with 5.45% and ended with 6.63%. (For comparison, the segment rates were 5.51%, 6.25%, 6.48% - so this looks reasonable.)

The effective interest rate for the full yield curve was 8.10%. Is that reasonable?

I have only used segment rates, so I do not know if this is a common occurance.

8.19% is the highest I have seen for that period.
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Old 06-23-2011, 12:23 PM
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wooHoo wooHoo is offline
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Easy enough to check all the filings in the 2009 database for the highest and lowest. http://www.dol.gov/ebsa/foia/foia-5500.html
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Old 06-27-2011, 06:22 PM
Mark Cavazos Mark Cavazos is offline
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Default For the record

The highest reported EIR was 827% and the lowest non-zero EIR was 0.06%.

Okay, the decimal points were misplaced.

Actually, the highest reported EIR was 9.23%.
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