Pension Plan Discount Rate

CFA Level III Portfolio Management
#1

For the discount rate of a US company’s pension plan, I am confused by the idea that we can use safe long-term government bond total return as the discount rate for our liabilities? Why don’t we have to use a discount rate to represent the risk of these promised cash-flows, like we do say in the dividend discount model (ie a higher one, since the risk of this specific company is higher than that of the government’s)?

Thanks,

#2

Because if the firm didn’t owe money to retirees, it would have invested that cash in a risk free asset.

#3

Unless it invested the cash in something else.