PalacioHill

but why does it say in the CFAI book p. 450, first paragraph:

"For frozen busines plans the accrued benefit liablity is the ultimate liablity of the plan and has market exposures that are best mimicked by a cominbation of nominal and index-linked bonds."

please clearify!
thank you!

dyga

Nominal = for what has accrued so far
Index-linked= even if the plan is frozen, it has members who still continue to work and their wages will increase in the future. Some of the wage increases will due to inflation.

bkballa

is inflation indexed = real

strikethree

i thought your equity portion would be an inflation hedge already

plus, if your plan is not linked to inflation, and you match this with TIPS, you are screwed when inflation rate < the nominal rate on the annuities.