Changes Discussed in Accounting for Pension Fund Obligations

[jamesinca]

Changes Discussed in Accounting for Pension Fund Obligations
By MARY WILLIAMS WALSH

Published: September 25, 2003


The board that writes accounting rules for American business discussed changes yesterday that could wipe out much of the financial incentive for companies to convert to cash-balance pension plans.

The Financial Accounting Standards Board said it was beginning a study of the way many companies with cash-balance pensions measure the benefits they will eventually have to pay their employees. Actuaries said the board's approach could ultimately force these companies to report a much larger obligation than they now do.

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The board's new project will not address employees' concerns about their benefits or resolve long-running arguments about the fairness and legality of cash-balance conversions. But it could add weight to employees' complaints that companies and their actuaries have been able to exploit gray areas in pension accounting rules to reap financial benefits by converting to a type of plan that can hurt older workers.

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Industry groups are expected to lobby against the rule when a draft is introduced for public comment in the coming months. Mr. Lofgren predicted that actuaries would also rush to amend their clients' cash-balance plans in ways that would permit them to continue using the existing accounting treatment.

http://www.nytimes.com/2003/09/25/business/25PENS.html?th

[papau]

1. Some folks on EITF and FASB are hard headed "Do the right thing"

folks - thank God!

Usually they are ordered to follow the position taken by the firm - meaning the firm's clients - in these battles about "theory".

Here it looks like the AAA (the lobbying arm of the actuaries) asked for guidance because cash balance looked unethical to many - but with FASB approval we could not change.

But I like being in a Client service industry - the actuary Mr. Lofgren, of Watson Wyatt has the standard attitude - whatever is the change, stay with me and we will find a way around the new words! :-)

If the FASB allows input from individual actuaries I'll jump in - but for now I am just hoping the FASB has the AAA chose the words that tighten the rules. Should be an interesting discussion at Disney World at the FSA convention in October!

:-)

[jamesinca]

2. For some strange reason I have to confess to this

I have no idea what you or the article are talking about, it just looked like a good one to post. Maybe I have been up to long.