Not sure why they don’t add inflation to the actuarially determined discount rate for liabilities. Are we supposed to ignore inflation here ?
Present value of liabilities is determined at the rate of 5% discount.
So next year would liabilities not go up ( pensions are inflation adjusted for existing members ) , or does the discount rate adjust for inflation ? How do we know if it is not specified?
Never Mind: It does say in the guideline answer that: (Note that expected future liabilities already incorporate expected inflation-related adjustments to benefits for Plan participants.)
