Questions from attorneys on inflation and retirement economic damages

When calculating the value of a pension plan, do you add in additional inflation to what the pension will receive?

No. Inflation is usually explicitly included in the pension formula. For example, if the formula is based on the last four highest years, then the inflation will be included in the projected salary.

For example, we are assuming a 5.3 interest rate. For the pension plan, we don’t include inflation, because we know exactly how much he is going to receive, so there is no reason to grow the pension amount.



Is it appropriatee to use a lower interest rate to discount the pension annuities?

No the principles are the same as a lost wage analysis, you are simply trying to calculate the present value of the future pension annuity payments. In otherwords, you are trying to find the amount of money if paid today would replace the projected pension payments. The projected payment schedule should account for mortality so there is no need to use a higher discount factor.