Actuarial Notes

Survey of Asset Valuation Methods for Defined Benefit Pension Plans

By Society of Actuaries · 1999

Study guide: Exam RET-201

A Society of Actuaries research report on the asset valuation methods used in valuations of defined benefit pension plans, from a survey run in 1998 by the Society's Committee on Retirement Systems Research. Asset valuation methods are classified into four groups and nine specific methods, and the report measures how frequently each is used for U.S. and Canadian plans, by size of plan. It is the first phase of a two-phase research project.

On the syllabus

  • Exam RET-201 — Outcomes 1d; pp. 5-6 only, which list the types of asset valuation method.

Executive Summary

  • Asset valuation methods are classified into four groups and nine specific methods.
  • Approximately 6,000 questionnaires were mailed out and 9,670 plans were included in the study: 9,026 U.S. plans, 612 Canadian plans and 32 other plans.

1 Introduction

2 Description of Asset Valuation Methods

  • Description of Nine Methods Included in Survey
    • Fair Market Value (FMV)
    • Discounted Cash Flow
    • Book Value Methods
      • Cost Value
      • Amortized Value
      • Contract Value
    • Smoothed Value Methods
      • Blend (or Average) of Cost and Market Values
      • Write-up
      • Deferred Recognition
      • Average Market Value
  • Other Information Submitted by Survey Respondents
    • Trend-Line Method
    • Average Unit Value Method
  • Certain Regulatory Considerations in the United States
  • Asset Valuation Methods: Automatic Approval (AA) in the U.S.

3 Survey Methodology

  • Basic Approach
  • Data Collected

4 Survey Results

  • Presented as 17 tables with accompanying commentary, followed by a discussion of other related topics.

5 Bibliography

6 Survey Form

Sources