More About the Valuation

The shortfall of just over $10 million is based on the valuation of the CSI pension plan on a “going concern” basis (a basis that assumes the plan will continue indefinitely) and is equal to slightly more than one year’s worth of contributions by plan members and schools.
Currently, contributions coming into the fund exceed the cost of the benefits being paid out by about $3 million per year. The difference is needed to pay for the proposed indexing and to get through downturns in the markets and increases in the cost of benefits (due to lower interest rates) as we have experienced in the past few years.
Our pension consultants, Mercer Human Resource Consulting, maintain an indicator called the Mercer Pension Health Index. It shows that a typical pension plan that was 100% funded at the end of 1999, was still about 100% funded in August of 2001, but was only about 90% funded by August 2004, due to a difficult investment environment and reduced interest rates.

Full Issue: No. 156 - April 27, 2005

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