In Reading 26, linking epnsion liabilities to assets, they differentiate future wages from future service rendered? What is the difference?
They are both under part of benefits related to active participants.
I assume Future service rendered means wages to be paid for future service given no increase in wages Future wages means future wage growth for a given level of service
Thnaks, it might be. Still confused.
Why don’t we ask Elliott Spitzer about Future “services” rendered…or should it have been I guess past “services” now…
he tried to immunize them, but did not match durations correctly…
Hiya, Not sure of the context but for most liability measures (eg. accounting PBO) future services rendered is not included, but the effect of future wage growth is. For example, pension formula = 2% earnings at retirement x service If your employee is 50 years old earning $100K and will retire at 65, the PBO includes the effect of $100K growing to $150 over the next 15 years, but doesn’t include the extra 15 years itself: Liab = pv of [annual payment of 2% x 150,000 x service at age 50] In basic ALM for pensions, you don’t really consider future service, the basic assumption is that future contributions will cover that. More sophisticated models would extend to that liability, and then to future participants too.