The Total View - (Page 48) Interest Rates One major assumption used in determining the required annual funding is the interest rate, which helps estimate the value of plan liabilities. The pre-retirement rate reflects what plan assets are expected to earn, while the post-retirement rate can reflect either the expected return on plan assets for benefits paid monthly from the fund, or the interest rate used to set the purchase price or single sum distribution at retirement. The average pre-retirement interest rate remained nearly unchanged from 2005 at 7.1%. The maximum increased slightly from 8.5% to 8.8% while the minimum remained unchanged at 3.5%. Pre-Retirement Interest Rate by Valuation Year 4.0% 2000 4.0% 7.3% 9.0% 2001 4.0% 7.2% 9.0% 7.1% 8.5% 4.0% 2002 2003 4.0% 7.1% 8.5% 7.1% 8.5% 3.5% 7.1% 8.5% 3.5% 2004 2005 Minimum Average Maximum 2006 3% 4% 5% 6% 7.1% 8.8% 7% 8% 9% The minimum post-retirement interest rate was the same as the pre-retirement rate; however, the average post-retirement interest rate was lower at 6.7% and the maximum was 8.5%. Post-Retirement Interest Rate by Valuation Year 4.0% 2000 4.0% 6.9% 9.0% 7.0% 9.0% 4.0% 6.8% 8.5% 4.0% 2001 2002 2003 4.0% 6.8% 8.5% 6.7% 8.5% 3.5% 6.8% 8.5% 3.5% 6.7% 8.5% 2004 2005 Minimum Average Maximum 2006 3% 4% 5% 6% 7% 8% 9% DB plan data shown under accounting and funding for 2006 was collected from approximately 700 DB plans for which The Principal provided actuarial services 48
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.