Plan Sponsors Likely to Trim Discount, Return Rates: Mercer

January 28, 2003 ( - Plan sponsors are likely to lower expectations for both discount rates and pension plan returns, according to a new survey.

A random survey of Mercer consultants reveals that the most common 2003 FAS 87 discount rate expected to be used by organizations with a December 31 plan year end was 6.75%, as projected by two-thirds (68 of the 102) of respondents. A year ago the most popular rate was 7.25%, reported by roughly half of the 98 respondents.

The average expected rate of return on assets for respondents was 8.49% for 2003 – exactly 50 basis points lower than the rate for the prior year, according to Mercer.

However, the average salary increase assumption expected for the survey group was 4.41% for 2003 and nearly 70% of the respondents expect to use the same salary assumption rate they used last year (62 out of 90 respondents).

The survey data is based on what Mercer consultants expect their clients to select for 2003 expense calculations. A total of 102 responses were received but not all responses included data for each category.