In general, pensions have a long time horizon, right? Now, what if you had 2 pensions, each identical except that one has an average employee age of 50 and the other has an average employee age of 40. The one with the older employees would have a shorter time horizon, but would you still say it is “long”? What if the average employee age was 60? Would it still be a long horizon? What if a pension fund had an average employee age of 60, was underfunded, and had an equal number of retired and working participants? Is the horizon still long?
search the forum- this came up about a week or two ago.
a pension has a long time horizon unless the plan has been terminated (e.g., bankruptcy). if they give you average ages, the rule of thumb is 65 - x = horizon. so 65 - 50 = 15 would be an intermediate term horizon. if you are referring to the fact that a pension is a going concern (the company is not liqudating), that is known as “infinite life” but should not be confused with the time horizon for the IPS as it relates to the pension liability.
They tried this trick on one of the past real exams, '05 I think.
i dont remember where i saw it, but i think > 10 years is long term
asdffdsa Wrote: ------------------------------------------------------- > if you are referring to the fact that a pension is > a going concern (the company is not liqudating), > that is known as “infinite life” but should not be > confused with the time horizon for the IPS as it > relates to the pension liability. I don’t understand this. Could you explain more? I am always confused as to the appropriate time horizon for PB plans. - sticky