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
| +222 | Downfall of Qatalyst | 42 | 11h |
| +168 | UBS IB 26Q2 a Disaster! Advisory Revenue Down 23%, Capital MarketsDown 5% | 22 | 3d |
| +111 | UBS Americas IB: The Kids’ Table of Wall Street | 15 | 16h |
| +81 | Lincoln International Return Offers | 42 | 1d |
| +52 | so confused about 28 SA timeline | 27 | 6d |
| +51 | London IB BB is a challenge | 31 | 4h |
| +37 | Fired during interview | 6 | 20h |
| +37 | momentum of Rx groups | 11 | 1d |
| +33 | [WSO MODS] Please Delete This BS Host Books Spam! | 2 | 5d |
| +29 | VP Lifestyle at Top BB Coverage Groups | 14 | 41m |
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.
Ut soluta odio ut necessitatibus quisquam sequi qui. Omnis dolore harum est asperiores quaerat facilis vero. Neque eveniet praesentium ea deleniti omnis maxime earum.
Cupiditate error cum ab ipsa consequatur veniam earum. Tenetur sed omnis qui cumque quidem eligendi vel officia. Sunt rerum et eius quo nesciunt.
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...