The Impact of Longevity Improvements on U.S. Corporate Defined Benefit Pension Plans
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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.
Series:
Working Paper No. 2012/170
Subject:
Aging Expenditure Financial institutions Health Insurance Labor Pension spending Pensions Population and demographics
English
Publication Date:
June 1, 2012
ISBN/ISSN:
9781475505184/1018-5941
Stock No:
WPIEA2012170
Pages:
34
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