Headlines about "Accounting for benefits, incl. FASB, GASB"
Gathered from the web by the editors at BenefitsLink.com.
GASB Issues Guidance on Multi-Employer OPEB Plans
Excerpt: "The Governmental Accounting Standards Board (GASB) has issued an exposure draft of a proposed statement that addresses issues related to the use of the alternative measurement method and the frequency and timing of measurements by employers that participate in agent multiple-employer other postemployment benefit (OPEB) plans. The proposed Statement would amend paragraphs 33 - 35 of Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, to permit an agent employer that has an individual-employer OPEB plan with fewer than 100 total plan members to use the alternative measurement method, at its option, regardless of the number of total plan members in the agent multiple-employer OPEB plan in which it participates." (PLANSPONSOR.com; free registration required)
FASB Announces New Codification Structure, Superseding All Existing Statements
Excerpt: "The Financial Accounting Standards Board (FASB) has announced that its single source of authoritative nongovernmental U.S. Generally Accepted Accounting Principles (GAAP), the FASB Accounting Standards Codification?, will be effective for interim and annual periods ending after September 15, 2009. The FASB expects that the new system will reduce the amount of time and effort required to research an accounting issue and will provide accurate information with real-time updates as new standards are released." (Wolters Kluwer)
A Note on the Financial Accounting Standards Board Accounting Standards Codification?
Excerpt: "Avi Lev, [a very smart tax lawyer,] recently pointed out that, effective July 1, there is a new codification of accounting opinions. This sounds dry, but for those who work in this area, it is a phenomenal endeavor. These are the rules that regulate the reporting of most financial activity, and they have previously been scattered and disunited in their presentation. [See the Codification Website at http://asc.fasb.org/home.]" (theworkplace.biz)
Accounting for Pensions: Under Construction
Excerpt: "The purpose of this article is to bring together in one place ? and try to make sense of ? the various ongoing Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) projects on pension accounting. IASB deliberations are relevant to US companies because FASB and IASB are coordinating a broad review/revision of pension accounting with a view to 'convergence' ?unifying, where possible, FASB and IASB accounting." (JPMorgan Chase & Co.)
Executive Compensation: What's Reasonable?
Excerpt: "One factor in determining reasonable compensation that has gained prominence in some circuits, particularly the Seventh, is the value of the employee's contributions as reflected in the return on equity (ROE) of a hypothetical independent investor in the corporation, and the effect of that compensation on ROE. These are calculations CPAs are well-equipped to assist companies in making." (American Institute of Certified Public Accountants)
IASB Proposes Clarification of Accounting for Prepaid Pension Contributions
Excerpt: "The IASB has proposed changes to IFRIC 14, IAS 19--The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, to clarify how much of an asset may be recognized for prepaid minimum required contributions to pension plans. As proposed, an employer reporting under IAS that sponsors a US qualified pension plan with ongoing accruals could apparently recognize an asset equal to the greater of the plan's surplus or its credit balance. Whether this was the intended result is unclear, so further revisions of the proposal are possible. The comment deadline is July 27, 2009." (Mercer LLC)
FASB Going to Codification System on July 1, 2009
Excerpt: "The U.S. Financial Accounting Standards Board (FASB) is expected to institute a major change in the way accounting standards are organized on July 1, 2009. The FASB Accounting Standards Codification (TM) is expected to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP). After final approval by the FASB only one level of authoritative GAAP will exist, other than guidance issued by the Securities and Exchange Commission (SEC). All other literature will be non-authoritative. . . . While the FASB Codification is designed to make it much easier to research accounting issues, the transition to use of the Codification will require some effort and training. The FASB offers a free online tutorial, weekly alerts and an archived Webcast. In addition, Codification training opportunities are offered through professional accounting organizations such as the American Institute of Certified Public Accountants (AICPA)." (International Foundation of Employee Benefit Plans)
Resources for GASB Invitation to Comment on Pension Accounting and Financial Reporting
Excerpt: "The Governmental Accounting Standards Board currently is reviewing Statements 25 and 27, standards that provide guidance on pension accounting and financial reporting. In April 2009, GASB distributed an Invitation to Comment to solicit perspectives of interested individuals and groups regarding possible changes to these standards. Responses to the ITC are due July 31, 2009. Listed [on the target page] are resources pertaining to the ITC. Portions of the Invitation to Comment reflect views held by those who believe that public pension financial reporting should include plans' so-called market value of liabilities." (Governmental Accounting Standards Board)
[Guidance Overview] The GASB's Invitation to Comment on Pension Accounting and Reporting Standards (PDF)
Excerpt: "On March 31, 2009, the Governmental Accounting Standards Board (GASB) issued its Invitation to Comment (ITC) on potential changes in accounting and financial reporting standards related to public pensions. The ITC is an early step in the GASB's project to review these standards, and is intended to encourage comments from interested parties before the GASB begins its formal deliberations. Written comments are due to the GASB by July 31, 2009, and a public hearing is scheduled during the Board's regular meeting on August 26, 2009. This article summarizes the ITC, along with various arguments suggested in the ITC for and against potential changes to the standards. However, the article does not provide a detailed evaluation of the arguments, which will be done in a separate paper." (Gabriel, Roeder, Smith & Company)
[Guidance Overview] Compliance Considerations and Issues Surrounding the Repricing of Stock Options.
Excerpt: "The accounting for stock options (including re-pricings) is governed in the United States by FAS 123(R). Under this standard, the charge for any new options is only for the incremental value. Thus, in a value-for-value exchange (or one that is less favorable to the grantees), the re-pricing may be a shareholder-neutral event from an accounting expense standpoint." (JPMorgan Chase & Co.)
[Opinion] Taking No Action, Public Employee Plan Policymakers and Senior Administrators Are Digging Deeper Hole in OPEB Deficits
Excerpt: "[P]ension costs are surging as investment losses compel pension funds to send higher bills to public employers. That leaves virtually no money available for most jurisdictions to fully fund their OPEB plans on an actuarial basis. So what are most governments doing? Unfortunately, for many the answer is 'nothing.' Paralysis has set in, as the absence of sufficient funding leaves many budget offices declining to set up a properly funded OPEB trust. Many public officials have simply put their heads in the sand and decided to wait out the recession before looking seriously at their OPEB problems." (Governing.com)
Certain Implementation Issues Related to Other Postemployment Benefits
Excerpt: "Primary Objective: The objective of this project is to consider whether to modify certain requirements related to the measurement of actuarial liabilities for other postemployment benefits (OPEB) by agent employers." (Governmental Accounting Standards Board)
2008 Disclosures of Funding, Discount Rates, Asset Allocations and Contributions
Excerpt: "During the latter months of 2008, Watson Wyatt projected year-end pension funding status for accounting purposes at various times, capturing different interest rate and market environments. Now Watson Wyatt has analyzed actual funded status for the 100 largest pension sponsors among publicly traded companies with year-end 2008 fiscal dates, as disclosed in their Securities and Exchange Commission (SEC) 10-K filings. During 2008, actual funding ratios in this group declined by an average of 28 percentage points." (Watson Wyatt Worldwide)
GASB Seeks Comments on Pension Accounting and Reporting for Pension Plans (PDF)
Excerpt: "The Governmental Accounting Standards Board (GASB) has issued an Invitation to Comment (ITC) on Pension Accounting and Financial Reporting. The topics considered in the ITC include the process on which pension accounting and financial reporting should focus; recognition of liabilities and expenses; measurement of unfunded pension obligations; the use of actuarial methods; and reporting by government employers in costsharing multiple-employer pension plans and reporting by pension plansthemselves." (National Conference on Public Employee Retirement Systems)
[Opinion] BusinessEurope, Nippon Keidandren, FEI Comment to IASB on Employee Benefits
Excerpt: "On April 20, 2009 a joint comment letter was filed by BUSINESSEUROPE, Nippon Keidanren and the Committees on Corporate Reporting (CCR) and Benefits Finance (CBF) of Financial Executives International in response to the International Accounting Standards Board's current deliberations on the IASB's Discussion Paper entitled: Preliminary Views on Amendments to IAS 19, Employee Benefits." (Financial Executives International)
[Guidance Overview] Change in Accounting Method Issues Arising from VEBA Terminations and IBNR Deductions
Excerpt: "This article addresses the accounting method issues that arise in two scenarios. In the first scenario, an employer terminates a welfare benefit fund, such as voluntary employees' beneficiary association (VEBA). In the second scenario, an employer without a VEBA begins taking deductions under IRC ? 162(a)(1) for medical claims that are incurred but not reported (IBNR) as of the end of the employer's tax year." (Deloitte via BenefitsLink.com)
[Guidance Overview] This Year's Benefit Plan Audit Headache: FAS 157
Excerpt: "The FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements ('FAS 157') establishes a framework for measuring fair value and expands disclosures about fair value measurements in the notes to a plan's financial statements. As a practical matter, FAS 157 must be implemented for all plans that prepare financial statements, without regard to whether the auditor is engaged to perform a full scope or limited scope audit. FAS 157 applies for fiscal years beginning after November 15, 2007." (form5500help.com)
Notice of Public Hearing and Request for Written Comments: Pension Accounting and Financial Reporting (PDF)
76 pages. Excerpt: "A public hearing is scheduled during the Board's regular meeting on August 26, 2009, beginning at 8:30 a.m. in Norwalk, CT. Although interested participants may attend in person, individuals or organizations also may participate in the public hearing by telephone. Details regarding their participation will be provided after the GASB receives a notice of intent to speak. Deadline for written notice of intent to participate in public hearing: July 31, 2009." (Governmental Accounting Standards Board)
Government Finance Officers Association Publishes 'OPEB Toolkit'
Excerpt: "Governments need to take deliberate steps to ensure that any [Postemployment Benefits Other than Pensions] that they offer are sustainable over the long term (i.e., benefits are, and reasonably may be expected to remain, affordable to the government, as well as being competitive and sufficient to meet employee needs). Recognizing that this challenge includes many decision points, the Government Finance Officers Association (GFOA) designed the OPEB toolkit to be an online resource for decision making. The tools ? a collection of templates, sample documents, video presentations, case studies and informational resources ? are rooted in the experiences of GFOA members and based on GFOA recommended practices. While the toolkit is not designed to provide users with an immediate solution to their OPEB challenges, it is meant to provide directed guidance to help government officials understand the questions to ask and the decisions that need to be made. [A 7 Minute Video Presentation on the toolkit is available.]" (Government Finance Officers Association of the United States and Canada)
Mark-to-Market Valuation at a Crossroads? (PDF)
Pages 3 of 8 pages. Excerpt: "The move toward mark-to-market valuation for pension plans has seemed inexorable in recent years and has progressed across the entire pensionlandscape -- whether the terrain has been accounting or funding, private or public, national or international. Now, for the first time, we're seeing significant resistance. Will this moment be just a slowing down of a continued advance? A pause? A partial reversal?" (American Academy of Actuaries)
[Guidance Overview] Certifying a Pension Plan's Funded Status (PDF)
2 pages. (Milliman)
2009 Wilshire Report on State Retirement Systems: Funding Levels and Asset Allocation (PDF)
19 pages. Excerpt: "Financial data on public retirement systems lack the timeliness and uniform disclosure governing pension plans sponsored by publicly traded companies, making it difficult to conclude a study with data that is both current and consistent across systems. For this reason, our study methodology involves collecting data during the first one and a half months of each calendar year with the objective of acquiring as many reports as possible with a June 30 valuation date from the previous year." (Wilshire Consulting)
Tips for Small Employers to Comply with GASB 45
Excerpt: "Many managers of small municipalities, utilities, school districts and other governmental entities are in for a rude awakening once they discover the time, cost and human resource burdens of compliance. GASB 45 requires the accrual method of accounting (rather than pay-as-you-go), which means that the employer must account for the present value of future OPEB costs, including OPEB for current and future retirees. The liability on financial statements can be millions of dollars, even for a small entity." (Employee Benefit News; free registration required)
Pension Fund Shortfalls Causing Problems in Balance Sheets of Some of Chicago Area's Biggest Companies
Excerpt: "Boeing Co.'s shareholder equity is now $1.2 billion in the hole thanks to an $8.4-billion gap between its pension assets and the projected cost of its obligations for 2008. At the end of 2007, Boeing had a $4.7-billion pension surplus. If its investments don't turn around, the Chicago-based aerospace giant will have to quadruple annual contributions to its plan to about $2 billion by 2011. Stock market losses also pounded pension funds at Abbott Laboratories Inc., Caterpillar Inc. and Exelon Corp., with others sure to emerge as companies file their annual financial reports with the Securities and Exchange Commission in coming weeks." (Crain Communications, Inc.)
New GASB Provision Discloses How Much We Really Spend on Public-Sector Employees
Excerpt: "In 2004, the Government Accounting Standards Board (GASB) issued its Statement 45, which required cities, towns, and states to account for their outstanding health-care and benefits costs on an accrual basis by the time five years were up. In the past, cities could accumulate massive long-term debt -- the result of the lifetime benefits that came with public-sector union pension deals -- but not disclose it on their balance sheets beyond their immediate fiscal-year costs. This lack of transparency encouraged irresponsibility in negotiations by kicking costs to the next generation and obscuring true obligations from banks and lenders. Now, local governments have to produce balance sheets that account for the full projected costs of these unfunded mandates over a 30-year period." (The Manhattan Institute)
IASB Moves Toward Immediate Recognition of Changes in Retirement Plan Funded Status
Excerpt: "The IASB tentatively decided to separate key proposals in its March 2008 discussion paper, Preliminary Views on Amendments to IAS 19 Employee Benefits, into two categories: (i) recognition and presentation and (ii) contribution-based promises. An exposure draft on the first category, expected to be issued by year-end, will require immediate recognition of changes in defined benefit (including retiree medical) plan funded status. Accounting for contribution-based promises will be on a slower track and may ultimately become part of a comprehensive review of pension accounting issues." (Mercer LLC)
[Guidance Overview] FASB's Final Rules for Financial Reporting of DB Plan Assets
Excerpt: "Fundamental to the new FSP disclosure rules is a set of 'overall objectives.' Reading between the lines, the overall objectives function both as an explanation for certain requirements in the FSP and as a way of clarifying uncertainties that may arise about the detail of disclosure required in any given situation." (JPMorgan Chase & Co.)
U.S. Pension Funds Have Lowered Investment Return Expectations
Excerpt: "U.S. pension funds are projecting sharply reduced investment returns from major asset classes through 2013, according to new research from Greenwich Associates. A Greenwich press release said overall, corporate pension funds interviewed from July to October 2008 indicated they had reduced investment returns on plan assets to 7.4% annually in 2008 from 8.2% in 2007, and public funds cut overall portfolio return expectations to 7.6% from 8.5%." (PLANSPONSOR.com; free registration required)
Interest Rates Drops Forecast Much Lower DB Plan Funding Status on Accounting Basis for 2008
Excerpt: "An earlier Watson Wyatt analysis of pension funding in 450 FORTUNE 1000 firms projected an 8 percent decline in their defined benefit (DB) pension funding status under an assumption that the market conditions of Oct. 15 would persist through 2008.2 But interest rates have fallen by more than 200 basis points since then, and we are now projecting a much bigger 29 percent drop in funding status." (Watson Wyatt Worldwide)
Pension Plans' 8% Solution No Solution Anymore As Diminishing Returns Puts Plan Sponsors at Risk, with Underfunding Now Epidemic
Excerpt: "[W]hile higher savings rates are ultimately what the economy needs, most company pension plans that promise a payoff based on workers' final salaries assume an overall return on assets of about 8% a year. Individuals and their investment counselors are often even more optimistic, penciling in 9 or 10% a year and often maximizing exposure to riskier assets to try and get there. 'The available return from markets has been for some time a lot lower than people have understood,' said Gary Dugan, chief investment officer at Merrill Lynch's wealth management arm in London. Returns have been flattered by debt; both that employed in investment strategies to magnify returns and that taken out by consumers and partly recycled into corporate profits." (Reuters via Financial Week)
GM Settles with SEC over Pension Accounting Charges
Excerpt: "General Motors Corp. and the U.S. Securities and Exchange Commission reached a settlement Thursday over charges that the company improperly represented pension estimates in 2002. The Detroit Free Press reports GM was not fined by the SEC, but the auto giant agreed to follow SEC regulations in the future and is subject to a federal injunction under which it would face stiff penalties for any future violations. GM did not admit or deny any wrongdoing." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Final FASB Disclosure of More Asset Classes Held in Pension and Postretirement Benefit Plans
Excerpt: "The Financial Accounting Standards Board (FASB) on December 30, 2008, finalized revisions to FASB Statement # 132, Employers' Disclosures about Pensions and Other Postretirement Benefits. The revisions are effective for fiscal years ending after December 15, 2009, and are found in FAS #132(R)-1, Employers' Disclosures about Postretirement Benefit Plan Assets." (Wolters Kluwer)
Looking Back at Ten Years of Pension Accounting and Financial Reporting
Excerpt: "The GASB has embarked upon a project that will examine its standards of accounting and financial reporting for postemployment benefits -- including pension benefits and other postemployment benefits (OPEB), most notably retiree health insurance. The project began with a two-year research effort aimed at understanding if the GASB's pension standards -- Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers -- have been effective. Those Statements were issued in 1994 and were fully implemented by the late 1990s." (Govermental Accounting Standards Board)
The PPA and Market Turmoil ? Selecting and Changing Funding Methods
Excerpt: "How does you[r] actuary value your plan's liabilities? How does your actuary value your plan's assets? In the new world of PPA and its amendments by WRERA, there are many choices to be made. In this article, we explore those choices, as well as some as yet unresolved questions on the topic." (JPMorgan Chase & Co.)
[Guidance Overview] FASB Expansion of Disclosures About Postretirement Benefit Plan Assets (PDF)
Excerpt: "On Dec. 30, 2008, the Financial Accounting Standards Board issued FSP FAS 132(R)-1, which amends Statement 132(R) to require more detailed disclosures about employers' plan assets, including employers' investment strategies, major categories of plan assets, concentrations of risk within plan assets and valuation techniquest used to measure the fair value of plan assets. The FSP has other components. Read more details about the FSP in this issue of Heads Up, by Deloitte." (Deloitte Development LLC via Financial Executives International)
U.S. Considers Costly Switch to International Accounting Rules
Excerpt: "In a regulatory sea change that could cost billions of dollars, thousands of U.S. companies -- plus foreign corporations that do business here -- will adopt global financial reporting rules within five years if regulators have their way. The impact is likely to surpass that of the Sarbanes-Oxley Act of 2002, the tough anti-corporate fraud law of the Enron era that cost individual businesses millions of dollars in accounting fees. Whether U.S. companies like it or not, the new era of global accounting appears unstoppable, and businesses that ignore the International Financial Reporting Standards (IFRS) will fall behind." (USA TODAY)
FASB Staff Position No. FAS 132(R)-1: Employers' Disclosures about Postretirement Benefit Plan Assets (PDF)
29 pages. Excerpt: "1. This FASB Staff Position (FSP) amends FASB Statement No. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. 2. This FSP also includes a technical amendment to Statement 132(R) that requires a nonpublic entity to disclose net periodic benefit cost for each annual period for which a statement of income is presented." (Financial Accounting Standards Board)
[Guidance Overview] Valuing Stock Options: Is It Time to Reconsider Binomial Lattice Models?
Excerpt: "Valuation models were the subject of intense debate during the drafting of 'Statement of Financial Accounting Standards (SFAS) No. 123(R) -- Share-Based Payment.' The exposure draft would have required companies to use a binomial lattice model (or something similar) to value employee stock option awards, but the final standard has allowed companies to use either a binomial lattice or a closed-form model, such as Black-Scholes, without preference. Companies overwhelmingly have selected the Black-Scholes model. Most consider Black-Scholes easier to use and understand, its use is comparable with peers and its results were generally consistent with a binomial lattice approach. This article examines why those advantages might hold less true today and why companies might want to reconsider their model selection." (Watson Wyatt Worldwide)
SEI Provides Guidance on FAS 87 Disclosure Assumptions
Excerpt: "Despite current market conditions and returns for 2008, plan sponsors should not drastically adjust Return On Asset (ROA) assumptions for 2009, according to SEI's 2009 update of an annual research study on Financial Accounting Standards No. 87 (FAS 87)." (PLANSPONSOR.com; free registration required)
[Guidance Overview] GASB 45: Governmental Employers Are Seeking Balanced Solutions
Excerpt: "This article describes in layman's terms how the GASB 45 liabilities are actuarially deteremined and discusses cost-management approaches for managing the liabilities to an acceptable level, while striving to avoid significant reductions to retiree health benefits." (Benefits & Compensation Digest via Hay Group)
Escaping the PPA Red Zone - A Case Study of a Multiemployer Plan
Excerpt: "In a mutual effort to improve a Taft-Hartley multiemployer plan's funded status, the employers and the union had agreed in May 2006 on a contract with significant annual contribution increases extending into 2009. Then on August, 17, 2006, the Pension Protection Act of 2006 (PPA) was enacted. Under PPA rules, this plan would be considered in critical status, or in the 'red zone.' The trustees of a plan in critical status are required to work with their actuary to develop optional 'rehabilitation' plans that will allow the actuary to certify that the plan is projected to emerge from critical status." (Milliman)
Advantages of Using Conventional Actuarial Approaches in Public Plans
Excerpt: "National Conference on Public Employee Retirement Systems has published a new Research Series paper entitled The Advantages of Using Conventional Actuarial Approaches in Valuing Public Pension Plans. Financial economics is a branch of economics that studies capital markets, examining why people invest, how investments should be valued and how investment risk and return should be measured. Over the past decade, adherents to these theories have successfully advocated applying principles of financial economics to corporate pension plans through calculation of a 'market value liability.'" (Cypen & Cypen)
[Guidance Overview] FAS 132 Update: Financial Reporting of Defined Benefit Plan Assets
Excerpt: "In June 2008 we posted an article on the financial reporting of DB plan assets, reviewing Financial Accounting Standards Board deliberations on a proposed FASB Staff Position (FSP). In this article, we begin with a summary of the proposed FSP and then discuss changes that, since our last article, have been tentatively approved by FASB. A word of caution: FASB's process is remarkably open, but it is something of a moving target. There is no final guidance on this issue yet." (JPMorgan Chase & Co.)
Compensation Costs Per Hour Worked in Private Industry, September 2008
Excerpt: "In September 2008, private industry employer compensation costs averaged $27.07 per hour worked. Private industry employer wages and salaries averaged $19.14 per hour (70.7 percent), while total benefits averaged $7.93 (29.3 percent)." (U.S. Bureau of Labor Statistics)
Hidden Risks for Pension Funds?
Excerpt: "Sponsors are facing the prospect of having a much lower funded status -- with the higher balance-sheet liability and contribution requirements that go along with this -- in a year they can least afford it. However, plan sponsors may be substantially underestimating the real value of their pension obligation by using high-quality corporate bond yields to value them, as accounting rules require. Their real pension liability may, in fact, be higher than what they will be obliged to disclose for balance-sheet accounting purposes." (The Vanguard Group, Inc.)
[Guidance Overview] Backdated Options: The Tag-Along Qualified Plan Claims
2 pages. Excerpt: "Companies that allegedly backdated stock options now have a companion concern. Fiduciaries of their 401(k) plans are facing ERISA fiduciary claims where their plans have maintained company stock funds. In one such case, a federal district court has permitted a former employee to proceed with a claim against the employer and certain of its officers for breaches of ERISA fiduciary duties relating to alleged backdating. Bendaoud v. Hodgson, 2008 U.S. Dist. LEXIS 72788 (D. Mass. 2008)." (Utz, Miller, Kuhn & Eickman, LLC)
[Guidance Overview] Speakers' Presentations to the 2008 Conference of the Public Pension Financial Forum
Topics include 'IRS Roundtable on Voluntary Compliance,' 'The Future of Public Sector Retirement Plans,' and '[Investment] Performance Calculations 101." (Public Pension Financial Forum)
Pension Benefit Guaranty Corporation Concerned About Detroit 3 Buyout Costs
Excerpt: "The federal corporation that insures retirement plans sent letters this week to General Motors Corp., Ford Motor Co. and Chrysler LLC, raising concerns about using pension funds to buy out employees. The Pension Benefit Guaranty Corp. warned that recent buyout and employee-reduction programs were not accounted for when the automakers estimated how much money would be needed to pay future pensions and that they 'may undermine the state of the plans.' In his letters to the automakers Wednesday, PBGC Director Charles E.F. Millard asked for a breakdown of the costs of each employee-reduction program." (Detroit Free Press)
Pension Benefit Guaranty Corporation Asks Carmakers for Buyout Details
Excerpt: "Federal pension regulators expressed concern the big three U.S. automakers' cost-cutting efforts may harm their retirement programs and come back to haunt taxpayers should the companies default on the plans. The director of the Pension Benefit Guaranty Corp. sent letters this week to General Motors Corp., Ford Motor Co. and Chrysler LLC asking for information about their buyout and other employee-attrition programs. Such programs could drain money from pension plans by accelerating retirement-related costs that otherwise wouldn't come due for years." (Bloomberg L.P.)
The Advantages of Using Conventional Actuarial Approaches in Valuing Public Pension Plans
Excerpt: "The publication makes the argument that current actuarial methods for valuing assets and liabilities in public pension plan are appropriate and that requiring new disclosures are not only burdensome, but also do not provide any new insight into the health of the plan. Furthermore, the new disclosures could lead some to believe the plan is in worse shape than it actually is." (National Conference on Public Employee Retirement Systems)
[Guidance Overview] FASB Agrees to Three Additional Disclosures of Fair Value of Asset Valuation
Excerpt: "At its October 29, 2008, meeting, the Financial Accounting Standards Board (FASB) approved revisions to Financial Accounting Statement (FAS) 132(R)-a, Employers' Disclosures about Postretirement Benefit Plan Assets. In addition to setting an effective date of fiscal years ending after Dec. 15, 2009, the FASB approved three additional items of disclosure. Employers will have to disclose separately the following for each major category of plan assets: . . . ." (Wolters Kluwer Law & Business)
Navigating Your Way Through Market Turbulance (PDF)
12 pages. Excerpt from a Principal Financial Group press release: 'As market turbulence takes its toll on everything from 401(k) account balances to pension plan funding, employers are scrambling to assess the full impact on their retirement programs. They are also worried about what actions they may need to take right now as fiduciaries. . . . A new guide from the Principal Financial Group(r) can help employers make this critical review of their retirement programs. Navigating Your Way through Market Turbulence takes an in-depth look at how the market volatility may be affecting four common retirement plan types: defined benefit, defined contribution, Employee Stock Ownership Plan and nonqualified deferred compensation. The guide offers action steps to consider for each plan type." (Principal Financial Group)
[Opinion] What You Need To Know About Corporate Pension Plans
Excerpt: "The problem with Lockheed Martin and several other companies is that the potential for big pension shortfalls is craftily understated in the discount rates they use in their projections. Lockheed has been using a discount rate of 7.5% for its pension plan returns. Is that reasonable? No way! Nor should you accept a rate like that in an annuity or life insurance plan's projections. First of all, a pension plan should be conservative. It should hold bonds along with blue-chip stocks, and bonds do not pay anything near 7.5% unless they are of poor credit quality and highly risky." (Contrarian Stock Market Investing News)
[Guidance Overview] Issue Brief: A Guide to Implementing GASB 45 (PDF)
20 pages. Excerpt: "This issue brief examines how North Carolina local governments are meeting their obligations to report their unfunded retiree health care obligations. The brief is based on a survey of the 30 local governments in the state with annual revenues greater than $100 million. Key findings include: 88 percent of the respondents have a multi-year contract with an actuarial service selected by the NC League of Municipalities and the NC Association of County Commissioners; the actuaries for all respondents applied a realistic discount rate; when they are unsure if their bond rating might be affected, local governments take the initiative to seek advice from bond-rating firms." (Center for State and Local Government Excellence)
[Guidance Overview] Your Defined Benefit Pension Plan's Liability May Be Overstated (PDF)
2 pages. Excerpt: "If you have a defined benefit pension plan, its net liability on the balance sheet is probably overstated by between 3% and 10%, assuming it is 80% to 95% funded. Its annual cost reflected on your bottom line is probably overstated by 1% to 2%. In total, pension liabilities in the United States are probably overstated on balance sheets by roughly $25B. Essentially, most actuaries have used a good answer to the wrong question, but this actuary proposes asking a better question." (Findley Davies, Inc.)
Year-End Pension Accounting Declines Might Be Milder Than Expected
Excerpt: "Unsurprisingly, the value of pension plan assets has dropped sharply so far this year, and under Financial Accounting Standard (FAS) 158, funded status for 2008 will decline for most pension plans. However, today's higher discount rates will soften the drop considerably. Despite the dramatic drops in the stock market during early October, we project only a moderate decline in average funding status -- from 96 percent in 2007 to 88 percent in 2008." (Watson Wyatt Worldwide)
[Opinion] The Need for Funding Legislation: Questions and Answers (PDF)
4 pages. Excerpt: "What funding changes are needed? There are four key changes that are needed, each of which is explained further below.Consistent with Congressional intent in the PPA, asset smoothing needs to be permitted. For 2009 and 2010, asset smoothing needs to be permitted without the applicable restrictions, as a mean of easing the transition to the PPA funding rules. For 2009 and 2010, companies need the ability to choose a funding method without being compelled to continue using that method. . . . The transition to the 100% funding target needs to apply to companies both above and below the phased-in funding target. And the phase-in level for 2008 needs to apply again in 2009." (American Benefits Council)
[Opinion] Defined Benefit Plan Funding: The Effect on Plans, Plan Participants and Jobs (PDF)
Excerpt: "The unforeseen and nearly unprecedented decline in the market has affected almost all plans. This decline is exacerbated by Treasury's interpretation of the Pension Protection Act as effectively requiring plan assets to be marked to market for funding purposes. Thus, in general, every dollar of asset loss must be immediately taken into account. This dire situation could have devastating effects on jobs and the economic recovery. This document provides (1) aggregate funding data, (2) examples of shocking increases in funding obligations, (3) the effects of this situation on jobs and retirement security, (4) a solution, and (5) an explanation of why our solution needs to be enacted now." (American Benefits Council)
FASB Postpones Until 2009 Further Disclosure of Postretirement Benefit Plan Assets
Excerpt: "The Financial Accounting Standards Board (FASB) has agreed to postpone until 2009 the effective date of the changes it is making in Financial Accounting Statement (FAS) No. 132(R)-a, Employers' Disclosures about Postretirement Benefit Plan Assets. In coming to this decision at its September 24, 2008 board meeting, the FASB members acknowledged that their deliberations have been slower than expected." (Wolters Kluwer)
FASB Finalizes New Disclosures About Pension and Retiree Health Plan Assets
Excerpt: "Sponsors of pension, retiree health and other post-retirement benefits plans will have to make expanded disclosures about their plans' assets for fiscal years ending after Dec. 15, 2009, FASB decided Oct. 29. Sponsors of plans investing in hard-to-value (Level 3) assets should determine whether system updates are needed before current fiscal year-end to track information for the new Level 3 asset reconciliation. Publication of the amended standard is expected by 2008 year-end." (Mercer LLC)
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