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Suppose Ford's defined-benefit pension plan offers a retirement benefit tied to years of service and final salary (like most DB plans) and that the
Suppose Ford's defined-benefit pension plan offers a retirement benefit tied to years of service and final salary (like most DB plans) and that the retirement benefit is further increased by a fixed 5% per year each year. Ford plans to change the retirement-plan formula so the amount of the retirement benefit increase is positively correlated to how Ford's stock has performed (rather than the fixed 5% rate). This change in the retirement-benefit formula will cause the appropriate discount rate for the DB plan benefit to:
Increase
Stay the same
Decrease
