2012 AM section Q6

How come the return requirement does not include the effects of inflation? Is this because of the fact that future benefits are not indexed to inflation? I would think you would include it as most of the existing liabilities as of the time of the IPS are still indexed to inflation, however CFAI disagrees.

The return for the DB is the discount rate used to get the present value of the liabilities. That discount rate already incorporates inflation