Measuring Pension Liabilities: An Examination Of The Funding Levels Of Defined Benefit Pension Plans

Abstract

We examine pension funding measures and interest rate disclosures for 223 firms from the Fortune 500. Three different liability measures are used to develop funding ratios, which indicate sample firms funding condition. We then examine firms discount rate estimates and compare these estimates with their funding levels. Using chi-square tests to examine dependence between rates and funding, we determine whether over (under) funding is simply an artifact of the choice of discount rates or the result of authentic economic conditions surrounding the pension plan.