2017 Survey: Economic assumptions for accounting
Recently, Morneau Shepell issued its 17th annual survey on the economic assumptions used by Canadian public companies to account for the costs of their defined benefit plans. The data was gathered from audited financial statements as at December 31, 2016.
Here are a few highlights of the survey:
- Discount rates at December 31, 2016 have decreased when compared to the prior year. The median discount rate was 3.80% as at December 31, 2016 compared to 4.00% a year earlier. The discount rates used for non-pension benefits are similar to those used for pension benefits.
- More than three quarters of the companies surveyed used a compensation increase assumption between 2.50% and 3.50% (median of 3.00%, which is identical to last year’s median).
- Companies surveyed showed a 93% overall ratio of pension assets to defined benefit obligation for accounting purposes.
- The median assumption for the short-term medical cost trend rate was 6.20%, while the median ultimate trend rate was 4.50%. Those rates are identical to last year.
For complete details of the survey, please refer to the document available on the Morneau Shepell website.