Got a pension question for y’all –
For purposes of valuation - Underfunded pension plans = (unfunded obligation) * (1-t) - Unfunded OPEB = full amount of OPEB !?
Is that how valuation is done ? do you know the reason for full amount of OPEB vs. post-tax for pensions?
thanks
| +433 | Don’t work at UBS - UBS Sucks | 40 | 28m |
| +327 | Article - UBS’ Investment Bank Keeps Losing Ground | 41 | 4d |
| +184 | Should My Intern Get a Return Offer? | 53 | 5h |
| +63 | When to Leave Office as Intern | 8 | 5d |
| +56 | F*ck it I'm Going to Med School | 19 | 1d |
| +39 | What do you say to ppl who don’t know EVR/LAZ/CVP/PJT | 29 | 23h |
| +39 | Would you rather be a Touse Squid or a Bouse Mogger in IB | 2 | 5d |
| +39 | Living in greenwich as an analyst? | 8 | 2h |
| +32 | STEM student lost in London IB recruiting | 18 | 6h |
| +28 | Getting Laid in IB? | 15 | 53m |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
bump
Because companies can get a tax break from contributing to pensions. So if they put in x, they get a tax shield of xmarginal tax rate and this can be viewed as only putting in x(1-t), thus they're not on the hook for the full underfunding and you can use this notion to value their equity higher.
Not sure about OPEB - but if you assume that the company can get a tax benefit on the pensions, you can probably assume the same thing for OPEB. That's what I did the one time I worked with this in-depth.
Also, it's not a given that you tax-adjust. You could more conservatively just take the full amount of underfunding. There are different views on this - clarify with your team. Moody's, for example, does not tax- adjust the pension underfunding when looking at adjusted debt but they also don't include OPEB, while S&P includes OPEB and tax-adjusts everything.
Voluptatem consequuntur et minima deserunt. Repellat est vel consequatur autem ex aut accusamus est. Quo amet et et culpa.
Aut iste consequatur dolorem itaque odio iure. Ut dicta velit ad consequatur vitae inventore.
Aliquid earum praesentium occaecati et ut. Eos eos et et facilis nulla mollitia. Et voluptatem assumenda cumque perspiciatis sed voluptatem illum et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...