This document discusses bringing actuarial measures of defined benefit pensions into U.S. National Accounts according to new 2008 SNA guidelines. It presents results of implementing the new recording based on actuarial calculations rather than actual payments, including higher household saving and wealth levels. Key issues affecting comparability between countries are different discount rates and the choice of ABO vs. PBO approaches. The U.S. Bureau of Economic Analysis may introduce imputed property income concepts not specified in 2008 SNA, risking international comparability.

1. Bringing Actuarial Measures of
Defined Benefit Pensions into the
U.S. National Accounts
Marshall Reinsdorf (International Monetary Fund)
David Lenze (U.S. Bureau of Economic Analysis) Dylan Rassier (U.S. Bureau of Economic Analysis)
Paper Prepared for the IARIW 33rd General Conference Rotterdam,
the Netherlands, August 24-30, 2014
Discussant: Jens Grütz (Eurostat)

2. Structure
A) What‘s new for db pensions in 2008 SNA?
B) Impact on U.S. National Accounts
C) Issues affecting internal/external comparability
- Discount rate
- ABO/PBO
- Imputed interest

3. What‘s new?
 Defined benefit pension schemes
 Pension = final salary * length of service* accrual rate
 Old recording based on actual payments
 New recording based on actuarial calculations
 Actual contributions which are smaller than newly
accrued entitlements lead to imputed employer
contributions – funding matters…

4. What‘s new?
 Actual /Imputed social contributions
t1 t2 t3 t4
5 5 5 5
5 0/5 0/5 17/-12
4/1 4/1 4/1 4/1
5 5 5 10/-5

5. RESULTS
 New, updated and extended methods / data sources
 Back casting
 Scaling up
 Harmonisation of actuarial methods and parameters
 AAA discount rate (not for federal plans)
 ABO approach for private plans, local and state plans
 PBO approach for Federal plans

6. RESULTS
 Imputed employer contributions are positive for
permanently underfunded pension plans.
 Imputed employer contributions are negative in case
of catch-up contributions; in particular for private
plans resulting from the dot.com stock market bubble
and the financial crisis.
 In total, household saving and household wealth are
higher when pensions are measured on an actuarial
basis.

7. Comparability issues
 Discount rate
 One identical discount rate for private, state and local
plans based on AAA corporate bond yields.
 Higher discount rate for federal plans. The BEA assumes
the same rate used by federal actuaries.

8. Comparability issues
ABO versus PBO approach
 ABO: No future income increase
 PBO: Fair value of pension entitlements, taking into account
(likely) future income increases
 BEA decisions:
 Private, state and local pension plans: ABO based calculation
 Federal plans: PBO based calculation
 Decision criterion: Secure rights to accrue additional benefits

9. Comparability issues
Actuarial approaches
 No explicit guidance by 2008 SNA; only implicit reference to
other accounting standards
Questions
 Should all db schemes be treated in the same actuarial way in
order to arrive at comparable results? On national and
international level?
 Should national accountants judge whether pension rights
are „secure“?

10. Comparability issues
 Imputations in National Accounts
 Imputed employer contribution – Introduced by 2008
SNA
 Imputed property income on the unfunded actuarial
liability – Interpretation of 2008 SNA by the BEA

11. Comparability issues
The underfunding of db plans may lead to negative saving of
pension funds
 Investment income attributable to insurance policy
holders is lower than the actual rate of return on plan
assets
 Holding gains are expected to fill the funding gap

12. Comparability issues
The BEA solution
Imputed property income on the unfunded actuarial liability
= Discount rate *(actuarial liability-plan assets)
However,
the SNA does not mention imputed property income. In
addition, the SNA income concept does not include holdings
gains.

13. Comparability issues
The BEA decision to develop and apply the concept of
imputed property income on the unfunded actuarial liability
may lead to comparability problems in the recording of db
pension schemes.
Question
Should we go beyond the SNA concept or should an
alternative recording of pensions be restricted to a
supplementary table or a satellite system ?

14. contact: Jens.GRUETZ@ec.eurostat.eu