U.S. corporate defined benefit plan liabilities will increase about $110 billion due to new mortality tables recently published by the Society of Actuaries, a new Moody’s Investors Services report says.
The society estimates there could be a 4% to 8% increase in projected benefit obligations due to the publication of the new mortality tables on Oct. 28, showing increased overall longevity among men and women currently aged 65.
Overall longevity among men rose to 86.6 years in 2014 from 84.6 in 2000, and among women it rose to 88.8 years in 2014 from 86.4 in 2000.
Moody’s uses a 6% increase to estimate the overall projected benefit obligation of U.S. defined benefit plans will rise about $110 billion, which the company says is a credit negative.
Individual company liabilities will vary by the average age of a pension fund’s population — the older the population, the more the liabilities will increase — and whether the pension fund instituted interim amendments since the last full tables were published in 2000, in which case the liabilities will increase slightly less.
“Given these increasing liabilities and cash drains, we expect to see an acceleration in lump-sum offers and annuitizations,” the report said.
Wesley Smyth, vice president and senior accounting analyst at Moody’s and author of the report, did not return phone calls by press time.