2012年-IMF国际货币组织全球_The_Impact_of_Longevity_Improvements_on_US_Corporate_Defined_Benefit_Pension_Plans_34页_1mb

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

Core Content

This paper provides the first empirical analysis of how improvements in life expectancy affect the liabilities of private U.S. defined benefit (DB) pension plans. It uses data from the U.S. Department of Labor (DOL) to construct a longevity variable and assess the impact of varying life expectancy assumptions on pension liabilities.

Main Points

• Impact of Longevity on Liabilities: Each additional year of life expectancy increases pension liabilities by approximately 3 to 4 percent. This effect is both statistically and economically significant.
• Economic Magnitude: As of 2007, an additional year of life expectancy could increase U.S. private DB pension liabilities by $84 billion, potentially doubling the underfunding of these plans.
• Global Context: The global value of private DB pension liabilities is estimated at $23 trillion, and a similar longevity shock could raise these liabilities by $2.8 trillion.
• Underfunding of Plans: U.S. private DB pension plans were underfunded by $83 billion in 2007, with total liabilities of $2.2 trillion.
• Mortality Tables: The paper analyzes the use of different mortality tables from 1995 to 2007 and finds that the 1983 Group Annuity Mortality (GAM) table was the most commonly used, although usage declined over time.
• Variation in Tables: The fraction of firms using the 1983 GAM table dropped from 69% in 1995 to 16% in 2007, while the use of unspecified tables increased from 7% to 57%.
• Liability Differences: Plans using more recent or unspecified mortality tables tend to have higher liabilities than those using older tables. For instance, in 2007, the 2007 Mortality Table was associated with the highest liabilities.
• Methodology: The authors use the Lee-Carter model to estimate life expectancy and compute the implied life expectancy at age 63 for working males to rank the mortality tables.
• Data Limitations: The DOL data only provides current liabilities, not projected benefit obligations (PBO), and the use of outdated mortality tables can lead to significant underestimation of liabilities.
• Longevity Risk Transfer: While DB pension plans can hedge longevity risk through market-based solutions such as longevity swaps, bonds, and buy-outs, the global activity in this area remains limited.

Key Information

• Data Source: Form 5500 filings from the DOL between 1995 and 2007.
• Mortality Tables: The paper analyzes the use of various mortality tables, including the 1951 GAM, 1971 GAM, 1983 GAM, UP 1984, UP 1994, and 2007 Mortality Table.
• Liability Measures: The study uses current liabilities as defined in Schedule B of the Form 5500, which are typically lower than projected benefit obligations due to legal discount rates.
• Underlying Assumptions: Mortality tables are based on historical trends and forecasts, and their accuracy depends on the quality of the forecasting technique and how frequently they are updated.
• Pension Protection Act (2006): While this act requires more frequent updates to mortality tables, it does not eliminate the problem of underestimating life expectancy improvements.
• Alternative Approaches: Offering defined contribution (DC) plans shifts longevity risk to employees, but the cost of annuities is high, and many employees do not purchase them due to pricing issues and adverse selection.

Conclusion

The paper concludes that the impact of longevity improvements on pension liabilities is significant and should be taken into account in pension plan design and management. The findings suggest that the current assumptions about life expectancy may be too conservative, leading to underestimation of liabilities and potential underfunding. The proposed method allows for a more accurate estimation of the effect of life expectancy changes without relying on exogenous assumptions.