# Pension asset-liability and cash flow studies

Canonical: https://finbryn.com/us/services/actuarial-services/pension-asset-liability-cash-flow-studies

Finbryn provides asset-liability and cash flow studies for defined benefit sponsors: benefit payments, funded status, contributions and PBGC premiums projected under rate and return paths, on assumptions agreed with the plan's actuary. Checked 2026-10-16 against IRS Notice 2026-57: adjusted segment rates of 4.75, 5.25 and 5.89 percent for 2027 plan years.

A pension plan has two sides that move for different reasons. The liability is a stream of promised payments, discounted at a rate that changes every month. The assets are whatever the trustee holds, and they respond to markets in a different way. An asset-liability study puts the two on one page and asks what happens to funded status, contributions and cash if rates or returns go somewhere else.

Finbryn builds that projection for the CFO, treasurer or investment committee chair. It starts from the plan's last valuation and census, projects benefit payments year by year, applies the funding rules and PBGC premium formulas, and runs the scenarios you choose. The assumptions are agreed in writing with the plan's actuary before anything is run, and the list travels with every table. We also record the data cut-off dates, so the next refresh compares like with like.

What comes out is a set of dollar paths, not a recommendation. Finbryn doesn't give investment advice, doesn't pick managers and doesn't set an allocation. A funding certification such as the Schedule SB or the adjusted funding target attainment percentage is signed by the plan's enrolled actuary, and the engagement letter names who signs.

The timing of the inputs matters this year. Code section 430(h)(2)(C)(iv) sets a 95% to 105% corridor, per IRS Notice 2026-57, around 25-year average segment rates for plan years beginning in 2025, 2026 and 2027, which keeps funding rates away from today's market. PBGC raised the 2027 flat premium to $116 per participant on a page updated October 14, 2026. Both show up below, with the arithmetic.

Public-sector retiree health liabilities use a [GASB 75 OPEB valuation](/services/actuarial-services/gasb-75-opeb-gasb-101-valuations).

What you get: Liability and benefit payment projection by year; Funded status and contribution paths under rate and return scenarios; Expense and cash flow forecast for the budget; PBGC premium projection by plan year; Summary pack for the investment committee, with assumptions listed

Software we work in: Microsoft Excel, Python, R

How filing works: We prepare the return and the working papers. A credentialed signer or licensed partner signs and files it, or you file it yourself.

## What is an asset-liability study for a pension plan?

An asset-liability study projects a plan's liabilities, benefit payments and assets together under several interest-rate and return paths, then reports funded status, required contributions and cash needs for each path. It's the pension version of a stress test, run in dollars, and its first question is how much of a rate move the plan can absorb before the contribution budget breaks.

The Actuarial Standards Board's ASOP No. 51 (effective November 1, 2018) addresses the assessment and disclosure of risk in measuring pension obligations and determining plan contributions, which is the frame a good study sits in. The inputs are the valuation, the census, the asset statement and the investment policy. The outputs are tables the investment committee can read without the model.

The diagram shows the run from data to the committee. The plan's actuary reviews the assumptions before the scenarios and the output after them.

Diagram: How an asset-liability study runs. Six steps: plan data and assumptions, liability projection, rate and return scenarios, funded status and contribution paths, review by the plan's actuary, and the pack for the CFO and committee.

## How do interest rates change required pension contributions?

Funding discount rates move slowly because they are averaged and then forced into a corridor. Under Code section 430(h)(2), present values use three 24-month average segment rates, and each is adjusted to sit within a percentage band of the 25-year average for that segment. Notice 2026-57 says the band is 95% to 105% for plan years beginning in 2025, 2026 and 2027, and that any 25-year average below 5% is deemed to be 5%. For plan years beginning in 2027 the 25-year averages are 3.13, 4.91 and 5.61.

That gives the following arithmetic for the September 2026 applicable month. The first segment's 24-month average of 4.36 falls below 95% of the deemed 25-year average of 5.00, which is 4.75, so the funding rate is lifted to 4.75. The second segment's 5.32 is above 105% of 5.00, which is 5.25, so it is cut to 5.25. The third segment's 6.02 is above 105% of 5.61, which is 5.89, so it is cut to 5.89.

| September 2026, percent | First segment | Second segment | Third segment |
| --- | --- | --- | --- |
| 24-month average, unadjusted | 4.36 | 5.32 | 6.02 |
| Adjusted, plan years beginning 2027 | 4.75 | 5.25 | 5.89 |
| Adjusted, plan years beginning 2026 | 4.75 | 5.25 | 5.99 |
| 25-year average used for 2027 | 3.13 (deemed 5.00) | 4.91 (deemed 5.00) | 5.61 |
| August 2026 spot rate for lump sums | 4.65 | 5.75 | 6.73 |

Read across and the corridor does two different things. Short payments are discounted at a rate above the spot (4.75 against 4.65), and later payments at rates below it (5.25 against 5.75 and 5.89 against 6.73). A study therefore models the funding liability and the accounting liability separately, because the corridor doesn't apply to the second one. The spot rates are the ones that set the minimum present value of lump sums under Code section 417(e)(3).

Source for every figure in the table: IRS Notice 2026-57 (checked 2026-10-16).

## How much does funded status move when rates move?

A first-order estimate uses duration: a liability with a duration of 11 changes by about 11% for each point the discount rate moves the other way. The table uses an illustrative plan with a 10,000 obligation at a 5.0% discount rate and 8,000 of assets ($000), and compares two asset mixes. In the current mix, half of the assets are in fixed income with a duration of 8 and the other half don't respond to rates. In the matched mix all assets behave like a duration of 11.

| Scenario ($000, illustrative) | Liability | Assets, current mix | Funded ratio | Assets, matched | Funded ratio |
| --- | --- | --- | --- | --- | --- |
| Base, 5.0% | 10,000 | 8,000 | 80.0% | 8,000 | 80.0% |
| Rates down 1 point | 11,100 | 8,320 | 75.0% | 8,880 | 80.0% |
| Rates up 1 point | 8,900 | 7,680 | 86.3% | 7,120 | 80.0% |

Check: 10,000 x 11% = 1,100, so the liability is 11,100 or 8,900. Half the assets is 4,000, and 4,000 x 8% = 320, so the current-mix assets are 8,320 or 7,680. Matched, 8,000 x 11% = 880, so assets are 8,880 or 7,120. The ratios are 8,320 / 11,100, 7,680 / 8,900 and 8,880 / 11,100.

The matched mix holds the funded ratio at 80.0% in both directions, but the dollar deficit still moves with the liability: it is 2,220 when rates fall and 1,780 when they rise. That's the point of liability-driven investing: it narrows the swing in the ratio, not the deficit itself. Real liabilities are convex, so a one-point fall adds slightly more than 11%. Finbryn runs the full cash flows, and the committee decides what to do with the answer.

## What goes into the cash flow and cost projection?

The projection stacks four lines of cash, each with its own rule and date.

| Line | Rule | Date or rate | Source |
| --- | --- | --- | --- |
| Benefit payments | Plan formula, mortality and retirement assumptions | Year by year | Plan document; ASOP 4, effective February 15, 2023 |
| Minimum required contribution | Paid within 8 1/2 months after the plan year ends | Sep 15 for a calendar-year plan | 26 CFR 1.430(j)-1 |
| PBGC flat-rate premium | Per participant | $111 for 2026, $116 for 2027 | [PBGC](https://www.pbgc.gov/employers-practitioners/premium-filings/rates) |
| PBGC variable-rate premium | $52 per $1,000 of unfunded vested benefits, capped per participant | Cap $751 for 2026, $783 for 2027 | PBGC |

The PBGC premium normally falls due on the 15th day of the 10th full calendar month of the plan year, which is October 15 for a calendar-year plan (2026 premium instructions). Using the illustrative plan again with 400 participants and unfunded vested benefits of 1,200 ($000): the 2026 flat premium is 400 x $111 = 44.4, the variable premium is 1,200 x $52 = 62.4 against a cap of 400 x $751 = 300.4, and the total is 106.8. For 2027 the flat premium is 400 x $116 = 46.4 and the total, holding the unfunded vested benefits constant, is 108.8.

Mortality is an input that changes by year. Notice 2025-40 sets the static mortality tables for valuation dates in 2026, and the notice says static tables are available only to small plans, so other plans use generational tables with improvement.

## How do the funding, accounting and lump-sum numbers differ in one forecast?

The same plan produces three liabilities in a single year, and a forecast that mixes them misleads. The table separates them by the rate that drives each.

| Measure | Discount rate basis | Smoothing | Who relies on it |
| --- | --- | --- | --- |
| Funding target (Code section 430) | 24-month average segment rates, inside the 95% to 105% corridor of 25-year averages | Averaging and the corridor | Trustees, IRS, PBGC |
| ASC 715 obligation | Rates at which benefits could be effectively settled, with attention to annuity prices and high-quality bonds (Statement 87, paragraph 44) | Market-related value of assets over up to five years (paragraph 30) | Financial statements and the auditor |
| Lump-sum value (Code section 417(e)(3)) | Monthly spot segment rates, 4.65, 5.75 and 6.73 for August 2026 | None | Participants electing a lump sum |

We label every projected line with its measure. A fall of one point in rates raises the accounting obligation at once, because ASC 715 uses a current rate, while the funding target responds over two years of averaging and the corridor. The CFO sees the balance sheet hit now and the contribution effect later, in the same table.

## Who signs, and what does Finbryn not do?

Finbryn projects liabilities, benefit payments and contributions on assumptions agreed with the plan's actuary. It does not give investment advice or select managers, and any funding certification is signed by the enrolled actuary. Finbryn doesn't sign certifications or set an allocation. Where a study contains an opinion others will rely on, the plan's actuary or another credentialed actuary the sponsor engages, who meets the US Qualification Standards, signs it, and the engagement letter names that person.

The standards of practice that frame the work, with the effective dates on the Actuarial Standards Board list: ASOP 4 on measuring pension obligations (February 15, 2023), ASOP 27 on selecting assumptions (January 1, 2025), ASOP 44 on asset valuation methods (March 15, 2008) and ASOP 51 on assessing and disclosing risk (November 1, 2018). The engagement letter states which of them the signer applies.

When the result points toward action, other pages cover the next step: [defined benefit freeze and DB-to-DC conversion costing](/services/actuarial-services/db-to-dc-conversion-plan-freeze) and [pension risk transfer and plan termination support](/services/actuarial-services/pension-risk-transfer-plan-termination). For the monthly cash view of the sponsor, see the [13-week cash flow forecast](/services/virtual-cfo-advisory/13-week-cash-flow-forecast).

## The process

1. **Gather the plan data**: Collect the latest valuation, census, asset statement, investment policy and the PBGC premium filing.

2. **Agree the assumptions in writing**: Confirm discount rates, mortality, retirement patterns and the scenarios with the plan's actuary before running anything.

3. **Project liabilities and benefit payments**: Build the year-by-year payment stream and the obligation under each funding and accounting basis.

4. **Run the rate and return scenarios**: Apply the shifts the committee wants, holding the assumptions list fixed.

5. **Add contributions, premiums and expense**: Layer the minimum contribution schedule, PBGC premiums and the accounting expense on each path.

6. **The plan's actuary reviews**: The plan's actuary reviews assumptions and output; a funding certification is signed by the enrolled actuary.

7. **Deliver the pack to the CFO and committee**: Provide dollar tables, the assumptions list and a one-page summary of what moves.

## Common problems we fix

| The problem | How we fix it |
| --- | --- |
| The CFO sees a funded percentage but not the cash that follows | Every scenario reports contributions, premiums and expense in dollars by year next to the ratio. |
| A rate move hits the balance sheet at once and the contribution budget later | We project the accounting and funding paths side by side and label each line with its measure. |
| The forecast uses last year's mortality table | We update to the IRS table for the valuation year and say which table each run used. |
| PBGC premiums are missing from the budget | Flat and variable premiums are projected by plan year using PBGC's published rates and caps. |
| The investment committee and the actuary work from different assumptions | One assumptions list is agreed with the plan's actuary first and printed with every table. |

## By the numbers

| Figure | What it means | Source |
| --- | --- | --- |
| 4.75 / 5.25 / 5.89 | Adjusted funding segment rates (percent) for plan years beginning in 2027, applicable month September 2026 | [irs.gov/pub/irs-drop/n-26-57.pdf](https://www.irs.gov/pub/irs-drop/n-26-57.pdf) (2026-10-16) |
| 3.13 / 4.91 / 5.61 | 25-year average segment rates (percent) for plan years beginning in 2027; averages below 5% are deemed to be 5% | [irs.gov/pub/irs-drop/n-26-57.pdf](https://www.irs.gov/pub/irs-drop/n-26-57.pdf) (2026-10-16) |
| $116 | PBGC single-employer flat-rate premium per participant for plan years beginning in 2027 ($111 for 2026) | [pbgc.gov/employers-practitioners/premium-filings/rates](https://www.pbgc.gov/employers-practitioners/premium-filings/rates) (2026-10-16) |
| Sep 15 | Minimum required contribution deadline for a calendar-year plan, 8 1/2 months after the plan year ends | [ecfr.gov/current/title-26/section-1.430(j)-1](https://www.ecfr.gov/current/title-26/section-1.430(j)-1) (2026-10-16) |

## Glossary

- **Segment rates**: Three interest rates, one for each band of benefit payment timing, used to discount a plan's benefit payments for minimum funding.

- **25-year average**: The average of a segment rate over the 25 years ending September 30 of the year before the plan year, used to set the corridor.

- **Corridor**: The band, 95% to 105% of the 25-year average for plan years beginning in 2025 to 2027, within which an adjusted segment rate must fall.

- **Funded status**: Plan assets less the plan's obligation, measured on a stated basis such as funding, accounting or termination.

- **Liability-driven investing**: An approach that sets plan assets relative to the liability's sensitivity to interest rates, to narrow swings in the funded ratio.

- **Duration**: A measure of how much a liability or a bond changes in value for a change in interest rates, in years.

- **Unfunded vested benefits**: Vested benefits not covered by plan assets, the base on which PBGC charges its variable-rate premium.

- **Funding target**: The present value of benefits accrued to date, discounted with the funding segment rates, under Code section 430.

## Frequently asked questions: Pension asset-liability and cash flow studies

**Q: What is an asset-liability study for a pension plan?**

A: It projects the plan's liabilities, benefit payments and assets together under several rate and return paths and reports funded status, contributions and cash needs for each. ASOP No. 51, effective November 1, 2018, frames the risk assessment. Finbryn prepares the projection on assumptions agreed with the plan's actuary (Actuarial Standards Board list, checked 2026-10-16).

**Q: How do interest rates affect required pension contributions?**

A: Funding rates are 24-month averages kept inside a 95% to 105% corridor of 25-year averages for plan years beginning in 2025 to 2027, so a market move reaches contributions slowly. For the September 2026 applicable month the adjusted rates for 2027 plan years are 4.75, 5.25 and 5.89 percent (IRS Notice 2026-57).

**Q: What is liability-driven investing?**

A: It is setting assets relative to how the liability responds to interest rates. In our illustration, matching the asset duration to the liability duration of 11 holds the funded ratio at 80.0% when rates move one point either way, though the dollar deficit still changes. Finbryn doesn't recommend allocations or select managers (IRS Notice 2026-57 rates, checked 2026-10-16).

**Q: What do PBGC premiums add to the forecast?**

A: For single-employer plans the flat premium is $111 per participant for plan years beginning in 2026 and $116 for 2027, and the variable premium is $52 per $1,000 of unfunded vested benefits, capped at $751 per participant for 2026 and $783 for 2027 (PBGC, page updated October 14, 2026). Premiums normally fall due October 15 for a calendar-year plan.

**Q: Do static mortality tables apply to every plan?**

A: No. IRS Notice 2025-40 gives static mortality tables for valuation dates in 2026 and says they are available only to small plans described in the regulation; other plans use generational tables. The projection states which table each run used.

**Q: Can the study support a lump-sum window or a termination decision?**

A: Yes, as an input. Lump-sum values use the monthly spot segment rates, 4.65, 5.75 and 6.73 percent for August 2026 (IRS Notice 2026-57). See [pension risk transfer and plan termination support](/services/actuarial-services/pension-risk-transfer-plan-termination) for the filings that follow.

**Q: What does an asset-liability study cost?**

A: The fee depends on the number of plans, the number of scenarios, how clean the census and asset data are and how often the model is refreshed. We found no public fee schedule for pension asset-liability studies when we checked on 2026-10-16, so we publish no range. Finbryn quotes in writing after seeing a data sample, and the quote names who signs.

**Q: Who signs the funding certification?**

A: The plan's enrolled actuary signs funding certifications such as the Schedule SB and the PBGC variable-rate premium certification, and the engagement letter names who signs. Finbryn prepares the projections and schedules for that review and doesn't give investment advice. For a calendar-year plan the Schedule SB is due with Form 5500 on July 31 of the following year (checked 2026-10-16).

Related services:
- [Cash balance and defined benefit plan valuation support](https://finbryn.com/us/services/actuarial-services/cash-balance-defined-benefit-plans)
- [Defined benefit freeze and DB-to-DC conversion costing](https://finbryn.com/us/services/actuarial-services/db-to-dc-conversion-plan-freeze)
- [Pension risk transfer and plan termination support](https://finbryn.com/us/services/actuarial-services/pension-risk-transfer-plan-termination)
- [ASC 715 pension and OPEB accounting valuations](https://finbryn.com/us/services/actuarial-services/asc-715-pension-opeb-valuations)
- [13-week cash flow forecast](https://finbryn.com/us/services/virtual-cfo-advisory/13-week-cash-flow-forecast)

Related guides:
- [2026 retirement plan limits, PBGC premiums, actuarial rates](https://finbryn.com/us/guides/retirement-plan-limits-actuarial-rates-2026)

## Sources

1. [IRS Notice 2026-57, update for weighted average interest rates, yield curves and segment rates (September 2026)](https://www.irs.gov/pub/irs-drop/n-26-57.pdf) (2026-10-16)
2. [IRS Notice 2025-40, updated static mortality tables for defined benefit pension plans for 2026](https://www.irs.gov/pub/irs-drop/n-25-40.pdf) (2026-10-16)
3. [PBGC, Premium rates (last updated October 14, 2026)](https://www.pbgc.gov/employers-practitioners/premium-filings/rates) (2026-10-16)
4. [PBGC, premium filing instructions for 2026 plan years](https://www.pbgc.gov/sites/default/files/documents/2026-premium-payment-instructions.pdf) (2026-10-16)
5. [26 CFR 1.430(j)-1, Payment of minimum required contributions, eCFR](https://www.ecfr.gov/current/title-26/section-1.430(j)-1) (2026-10-16)
6. [Actuarial Standards Board, Standards of Practice list with effective dates](https://www.actuarialstandardsboard.org/standards-of-practice/) (2026-10-16)
7. [FASB, Statement No. 87: Employers' Accounting for Pensions (pre-Codification)](https://storage.fasb.org/aop_fas87.pdf) (2026-10-16)

Reviewed October 2026

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