Liabilities — calculated by fair value of plan assets vs. projected benefit obligation — might be more accurate if accumulated benefit obligations were used instead.
Jeremy Gold, an independent consulting actuary in New York, said: "The world is becoming more aware that the significant number is ABO (accumulated benefit obligation) instead of PBO (projected benefit obligations)."
PBO assumes that all employees will stay until normal retirement age and includes compensation and additional-years-of-service estimates. ABO is what is owed to all employees today.
Mr. Gold said: "It's the actuary's guess as to some future salary, but it is not the practical implication for the fund ratio for flat salary plans. The companies where most of their liabilities are related to salaried employees instead of flat-dollar employees, the difference between the ABO and PBO is more significant. What you'll project is that the ABO is the more significant."
Investment returns for the top 100 corporate plans were healthy in 2004, but dropped from the previous year, following a slowdown in market growth.
The total return on plan assets for the top 100 plans was $108.6 billion in 2004, a 27.9% drop from $150.7 billion in 2003.