The Impact of Longevity Improvements on U.S. Corporate Defined Benefit Pension Plans

By John Kiff, Michael Kisser, Mauricio Soto, S. E Oppers

June 1, 2012

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John Kiff, Michael Kisser, Mauricio Soto, and S. E Oppers The Impact of Longevity Improvements on U.S. Corporate Defined Benefit Pension Plans, (USA: International Monetary Fund, 2012) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper provides the first empirical assessment of the impact of life expectancy assumptions on the liabilities of private U.S. defined benefit (DB) pension plans. Using detailed actuarial and financial information provided by the U.S. Department of Labor, we construct a longevity variable for each pension plan and then measure the impact of varying life expectancy assumptions across plans and over time on pension plan liabilities. The results indicate that each additional year of life expectancy increases pension liabilities by about 3 to 4 percent. This effect is not only statistically highly significant but also economically: each year of additional life expectancy would increase private U.S. DB pension plan liabilities by as much as $84 billion.

Subject: Aging, Expenditure, Financial institutions, Health, Insurance, Labor, Pension spending, Pensions, Population and demographics

Keywords: Aging, Benefit pension plans, DB pension plan provider, Freedom pension plan sponsor, Global, Group Annuity mortality table, Individual Annuity mortality table, Insurance, Life expectancy, Longevity Risk, Mortality, Mortality rate, Mortality table, Pension liability, Pension Plans, Pension spending, Pensions, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/170
Stock No:

WPIEA2012170
ISBN:

9781475505184
ISSN:

1018-5941

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