Headlines about "Accounting for benefits, incl. FASB, GASB"
Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] Backdating Stock Options Still a Risky Play
"The U.S. Court of Appeals for the Ninth Circuit agreed with a district court ... that the former CFO of semiconductor concern Maxim Integrated Products ... would be on the hook for backdating stock options without expensing them. The case is notable for two reasons: it has been one of the few times that an options-backdating case actually went to trial, and it shows that CFOs and chief executives have no way to hide from improper expensing, even years later." (CFO)
At April Meeting, GASB Simplifies Accounting for State Retirement System Liabilities (PDF)
"At the Governmental Accounting Standards Board (GASB) meeting April 18th through the 20th, the Board voted to greatly simplify the manner of apportioning the underfunding of typical state retirement systems among the individual participating employers. But the Board retained its original proposal that those apportioned liabilities should appear as liabilities on each participating employer's balance sheet beginning as early as 2014.... What remains uncertain is what the precise effects [will be]. Of particular concern and uncertainty will be the impact of the additional liabilities on public bond markets, on the rating agencies, on legal or contractual limitations on liabilities on the part of such participating employers, and whether efforts to enact specific state laws reallocating liabilities or reducing benefits will come about as a result." (Groom Law Group)
State and Local Pensions Face New Accounting Rules
"The changes will alter how liabilities are calculated and how assets are reported on financial statements. Pensions would begin using the rules for fiscal years starting after June 15, 2013, and employers such as school districts would follow a year later. [GASB,] which decides how states and municipalities must keep their books, is set to issue the new rules next month.... The rules may raise government costs in the $3.7 trillion municipal market as investors demand more yield to compensate for higher pension risk and possibly lower ratings." (Bloomberg News)
Potential Accounting Implications of Upcoming Supreme Court Decision on the Affordable Care Act
"A court decision that invalidates all or part of the ACA would likely become immediately effective. As a result, [PwC believes] certain accounting and reporting implications would need to be reflected in the period of the Court's decision.... If the ACA's treatment of Medicare Part D subsidies were among those provisions invalidated by the Supreme Court's decision, the increase in deferred tax assets resulting from the change for those employers receiving retiree drug subsidies (RDS payments) would be immediately recognized in the income statement in the quarter during which the provision was invalidated... The effect of this ... would be to effectively unwind the tax write-off that was taken in 2010." (PricewaterhouseCoopers LLP)
Too Much Reliance on Limited-Scope Audits Is Harming Benefit Plan Participants, EBSA Chief Says
"'The limited-scope audit is practically useless,' said [Phyllis Borzi], assistant secretary of [DOL's EBSA]. Speaking April 30 at the American Institute of CPA's conference on employee benefit plans, Borzi said limited-scope audits do not protect participants, and yet about 65 percent of employee benefit plan audits are limited-scope audits." (Bloomberg BNA)
Chart: Estimates of States' Net Tax-Supported Debt and Unfunded Pension Obligations as a Percentage of Personal Income (PDF)
"Combined pension data by state is estimated by Fitch based on state-provided figures, and/or most recent state bond disclosure documents, state annual reports, pension system annual financial reports and actuarial valuations. Fitch adjusted figures assume an 11% change in actuarial liabilities for every 1% variance between 7% and the plan's investment return assumption." (Fitch Ratings)
Employers' Accounting for Pensions and Other Retirement Plans May Be on FASB's 2012 Agenda
"Employers' accounting for pension, retiree medical and other post-retirement benefits -- specifically, the expected rate of return on plan assets and combining of various expense elements -- tops a list of new concerns stakeholders want FASB to address, according to Chairman Leslie Seidman's March 12 webcast on 2012 priorities." (Mercer)
Understanding Finances and Changes in State and Local Government Retiree Health Care (PDF)
"Governments need to understand what has been done so far to address OPEB liabilities, and assess whether these efforts are enough to put the provision of retiree health care on a more sustainable path." (Center for State and Local Government Excellence)
[Guidance Overview] What to Look for in 2012: Financial Statements
"The IASB revised its accounting standard for employee benefits (IAS 19) last year, which will require significant changes in reporting requirements in 2013.... FASB has not yet made similar changes and still allows for differing recognition techniques.... [P]lan sponsors with U.S.-based defined benefit plans must continue to determine if two sets of plan costs and disclosures may be required." (Retirement Town Hall )
Kentucky Forwards Report Criticizing Retirement System's Pay-to-Play Audits
"Kentucky Retirement Systems ... forwarded to the SEC a document from the attorney for [a board trustee] that criticized placement agent audits performed internally by KRS and by the state's auditor of public accounts, according a news release issued by the $13.3 billion retirement system." (Pensions & Investments)
Enrolled Actuaries Report, Winter 2011 (PDF)
This edition includes the following: GASB Unveils Preliminary Viewson Financial Projections; Research Projects Private Pension Funding Costs; Updated Social Security and IRS Amounts for 2012; Is 411(d)(6) Dead? Recent Developments for Hybrid Plans; and, PBGC Clarifies Instructions for Form 5500 on the reporting of premium payments. (Enrolled Actuaries Report)
[Opinion] Public Company Accounting Oversight Board's Recent Proposal on Executive Compensation
"The early leader for this year's 'Shocking Development of the Year Award' has to be last week's Public Company Accounting Oversight Board proposed amendments to auditing standards for identifying and assessing excessive risk in executive compensation programs.... If this proposal becomes a reality then it might be possible that an auditor could tell a company that its compensation programs are 'too risky' and that they cannot sign off on the financials, placing outside auditors in the role of pre-approving executive compensation programs. Nothing against auditors, but this is not their role, and I doubt that they want this role any more than we want to give it to them." (Winston & Strawn LLP)
Pension Plans: Are Big U.S. Firms Betting on a Bull Market with New Accounting Step?
"There has been a significant but mostly unnoticed shift in the way big U.S. companies account for the pensions on their books. On the face of it, this appears to be little more than a change in arcane bookkeeping procedure. But it could be a sign that corporate America is betting on rock-bottom interest rates and a continuing economic rebound through this year and next." (International Business Times)
Avoiding a DOL Audit of an Employee Benefit Plan Annual Report
"Plan administrators are well advised to review their selection of auditors and the annual opinions that accompany the audit opinion. Their diligence will be rewarded by avoiding costly DOL audits. Those administrators who receive a notice from the OCA should react quickly and address the issues raised in the notice immediately. The assistance of experienced benefits counsel is essential in satisfactorily resolving these issues." (Fox Rothschild LLP)
New Federal Accounting Rule for Contractor Pensions Could Cost DOD Billions
"The rule, which takes effect this week, requires the U.S. government to reimburse its contractors to a far greater degree for their employee pension costs. The Defense Department has not yet budgeted for the additional pension costs, but estimates they 'could be billions of dollars, conceivably[.]'" (Federal Times)
Updated PBGC 2010 Pension Insurance Data Tables Online (PDF)
"These frequently used tables offer information on statistical trends related to defined benefit retirement plans in the private sector. PBGC is issuing these tables electronically to provide updated information familiar to users of the Corporation's Pension Insurance Data Book and will make them available both as a PDF and in an Excel format that allows users to examine and sort the data to suit their needs." (Pension Benefit Guaranty Corporation)
Chart: OPEB Prefunding Analysis of California Retiree Health Benefits (PDF)
This is an analysis of the 2011 Valuation. (Gabriel, Roeder, Smith & Company)
State of California Retiree Health Benefits Program: GASB Nos. 43 and 45 Actuarial Valuation Report as of June 30, 2011 (PDF)
"The valuation was based on census information as of June 30, 2011, and measures actuarial liabilities as of June 30, 2011. The report includes expense and financial reporting information applicable to fiscal year end June 30, 2012, and a projection of annual expense for fiscal year end June 30, 2013." (Gabriel, Roeder, Smith & Company)
Avoid the Common Mistakes Affecting Plan Loans Webcast
Earn CE credit while ERISA expert, Charles Lockwood, JD, LLM, explains the administrative issues that affect plan loans. Have questions? Charles will address them either during or after the webcast. March 22nd at 2pm EST. (ASC)
Understanding the True Cost of State and Local Pensions
"Joshua Rauh of Northwestern University estimated that, when correctly discounted using the Treasury yield curve, total unfunded liabilities for public-sector pensions as of October 2011 are roughly $4.4 trillion, sharply higher than the 2009 figure of $660 billion computed under standard actuarial valuation. This amount exceeds total outstanding state and local government debt and is equal to nearly 30 percent of annual gross domestic product. These figures are so large that it is difficult to put them into context." (Freedom Politics)
A New Set of Best Practices for 'Other Post-Employment Benefits'
"Fortunately, the Government Finance Officers Association (GFOA) has stepped up to the plate with a new guidance document providing best practices to public employers seeking to establish an OPEB trust. This primer covers the basic questions that most public officials and managers will face, outlines the basic legal options and pitfalls, explains in simple terms the paths available and the pros and cons of each, and directs readers to literature in the field to help support sound decisionmaking. Any finance officer can start with this roadmap and easily chart a course to implement a trust within six months." (Governing)
Mark-to-Market Pensions Show Brutal Year
"[United] Parcel Service announced recently that it has adopted the mark-to-market method of pension accounting. It joins such other companies as Honeywell International, AT&T, IBM, and Reynolds American." (CFO)
New Edition of Accounting for Equity Compensation
The NCEO has just released the ninth edition of Accounting for Equity Compensation, which has been updated for 2012. Written in plain English for non-accountants, this book is a survival guide for understanding the impact of stock compensation on corporate financial statements. (National Center for Employee Ownership (NCEO))
Present Law and Background Relating to the Interaction of Federal Income Tax Rules and Financial Accounting Rules
"The House Committee on Ways and Means [scheduled] a public hearing for February 8, 2012, on the interaction of tax and financial accounting on tax reform. This document, prepared by the staff of the Joint Committee on Taxation, provides an overview of earnings per share computations and the financial accounting rules for deferred taxes and uncertain taxpositions. The document also provides examples of financial accounting for income taxes.' (The Joint Committee on Taxation)
The ROI of a 408(b)(2) Audit (PDF)
"This paper will discuss the benefits of the 408(b)(2) audit, and utilize a real-world case study to illustrate how the 408(b)(2) audit represents a true return on investment for plan sponsors." (Roland I Criss)
Guidance Provided on Electronic Health Record Incentives
"[M]edical providers must comply with standards for use of the technology and properly account for the incentive payments in an area where accounting principles are in an infant stage. [Last] week, the Healthcare Financial Management Association (HFMA) published an issue analysis to provide clarity on accounting for incentive payments received under the Health Information Technology for Economic and Clinical Health . . . Act." (American Institute of Certified Public Accountants)
Low Pension Discount Rates = Big Accounting Liabilities for FY2011
"Using the Citigroup Pension Discount Curve (CPDC) as a proxy, pension accounting discount rates could decrease by 100 basis points (or more). This will mean a big increase in the pension liability and net balance sheet liability for many plans." (Van Iwaarden Associates)
[Opinion] Latest News on Overall GASB Process; Two Views of Proposed Reforms
"One area of the proposed changes in the GASB rules that has been particularly worrisome has been those related to the manner in which cost-sharing plans will be required to allocate their net pension liability, pension expense, and deferred outflows of resources and deferred inflows of resources to their participating employers. The impact of this aspect of the proposed GASB changes on employers who participate in cost sharing plans could be devastating." (National Council on Teacher Retirement)
GASB Update: Two Views of Proposed Reforms for Governmental Pension Reporting and Accounting Rules
"[T]wo recent studies provide contrasting views of the likely results of the proposed changes as they now stand. The first, a working paper by Robert Novy-Marx, concludes that under the GASB rules as proposed, a governmental pension plan can improve its funding status 'literally by burning money.' The second, [from the Center for Retirement Research at Boston College] finds that employers and plan administrators should be prepared for funded ratios reported in their financial statements to decline sharply under the new GASB rules, but that '[p]olicymakers should not let new numbers throw them off course.'" (National Council on Teacher Retirement)
A Look at Public Sector Defined Contribution Health Accounts
"GASB 45 requires that unfunded liabilities be amortized over a 30-year actuarial time period. The magnitude of the OPEB liabilities was much more obvious after the accounting standard was implemented. To address these large OPEB liabilities, many state and local governments have reduced the health benefits offered to employees upon retirement." (National Association of Government Defined Contribution Administrators)
SEI Finds Narrowing of Range of Discount Rates Used by Defined Benefit Plan Sponsors
"According to the analysis of a database of 686 plan sponsors, the research shows a 140 basis point range of discount rates used for 2010 pension disclosure -- a 21 basis point decrease in range from 2009. The results of the study provide companies with guidance for setting the discount rate and return on asset (ROA) assumptions that pension plan sponsors will use for 2011 year-end disclosures." (PLANSPONSOR.COM)
States' Pension Fund Accounting Rules Examined
"[GASB] proposals would change the way public pension funds value their assets -- money that governments and their employees contribute to pension funds as well as the funds that pension investments earn -- and how they value their liabilities, or the benefits retirees are entitled to based on their pay and years of service." (Pittsburgh Post-Gazette)
[Opinion] Impact of GASB Public Accounting Proposals on Employers Participating in State Retirement Systems (PDF)
"If these proposals are finalized without change, participating employers will need to substantially revamp their accounting systems at considerable expense. Compliance is expected to be the responsibility of the employer, and the retirement system's ability to provide assistance in many cases may be limited. That may leave the burden of compliance on the contributing government employers." (Groom Law Group)
California Panel Releases Model Pension Disclosure Guidelines
"The California Actuarial Advisory Panel . . . has adopted a set of model disclosure elements recommended for actuarial valuation reports on public retirement systems in California." (PLANSPONSOR.COM)
Getting Executive Compensation Ready for 2012: Starting with ISS Guidelines (PDF)
"This Client Alert addresses some of the key implications for publicly traded U.S. companies, and is followed by our article titled 'Candor for Compensation Committees' which is reproduced from the latest edition of Board Member magazine because the article highlights actions that compensation committees should be taking this winter in order to be ready for the 2012 proxy season." (Paul Hastings LLP)
[Opinion] American Academy of Actuaries Letter on Accounting for Post-Retirement Benefits Other than Pensions (PDF)
"On behalf of the Joint Committee on Retiree Health and Pension Accounting Committee of the American Academy of Actuaries', we appreciate the opportunity to provide comments to the National Association of Insurance Commissioners (NAIC) on the exposure drafts of Statements of Statutory Accounting Principles (SSAP) No. 92 and No. 102, which are intended to replace existing standards governing accounting for pension benefits and postretirement benefits other than pensions (OPEBs)." (American Academy of Actuaries)
New Research Report Using GASB-Proposed Metrics Reveals Risks of Retirement Plan 'Depletion'
"Running out of money -- completely -- is a pretty big deal where I come from. That's the pension equivalent of the collapse of a Ponzi scheme. This is far worse than Social Security which can at least pay 75 cents on the dollar to the next generation under its current design." (Governing)
PBGC's Reported Deficit Doesn't Justify Premium Increase, Says American Benefits Council
"In its annual report for fiscal year 2011, the PBGC reported a record $26 billion deficit, a $3 billion increase from the $23 billion reported last year. However, according to [James A. Klein, president of the American Benefits Council], 'flaws in the way PBGC's financial condition is reported makes the situation appear far worse than reality.'" (Wolters Kluwer Law & Business / CCH)
Logical Implications of GASB's Methodology for Valuing Pension Liabilities (PDF)
"It is well known that the funding status of state and local government defined benefit pension plans, as measured by the accounting methodology prescribed by the Governmental Accounting Standards Board (GASB), improves when the plans take on more investment risk. This paper documents several lesser known logical implications of the GASB methodology." (University of Rochester, Simon Graduate School of Business)
GASB Calls for More Disclosure of State and Local Government Pension Obligations
"In the first step of what could be a lengthy rule-making process, the Governmental Accounting Standards Board issued a 'preliminary view,' on the proposal to create new rules, which calls for five-year projections of cash inflows and outflows and other financial obligations, including pensions obligations and long-term contracts, 'with explanations of the known causes of fluctuation,' . . . ." (Business Insurance)
Outlook Bleak for Pension Plan Expense and Contributions
"'Even though discount rates moved somewhat higher during November, they are likely to be in excess of 40 basis points lower at the end of this year than they were at the end of 2010' said Kevin Armant, principal in Mercer's Financial Strategy Group. 'Because equities have also underperformed expectations, corporations who use a December 31 measurement date will likely see larger pension liabilities on their balance sheet, as well as higher 2012 pension expense.'" (PLANSPONSOR.COM)
PBGC Plan Valuation Problems Go Beyond United Airlines
"The PBGC's inspector general said the agency lacks internal controls over the valuation of terminated pension plan assets, not just over the handling of United Airlines' plan terminations that the IG's report called 'seriously deficient.'" (Pensions & Investments; free registration required)
Full Funding and Cost Disclosure Needed in Public Pension Plan Reform, Paper Says
"The policy paper, 'Creating a New Public Pension System,' said reform must address structural problems involving unpredictable costs, incentive to underfund, and labor market distortions . . . ." (Business Insurance)
How Would GASB Proposals Affect State and Local Pension Reporting?
"Most economists contend that the discount rate should reflect the risk associated with the liabilities and, given that benefits are guaranteed under most state laws, the appropriate discount factor is closer to the riskless rate." (Center for Retirement Research at Boston College)
Steering Clear of Pension Benefit Restrictions
"Negative asset performance and declining valuation interest rates during 2011 will cause some pension plans to face benefit restriction issues for the first time in 2012. Potential repercussions include limits on accelerated distributions (lump sums), restrictions on plan amendments increasing the value of benefits, mandatory benefit accrual freezes and restrictions on unpredictable contingent event benefits . . . ." (Van Iwaarden Associates)
[Opinion] Pension Crisis Accounting Rule Comments Rigged by Gluttons at the Public Trough
"[Take a] look at comments opposing Government Accounting Standards Board proposed rules for a tiny bit of honesty about municipal and state pensions. Sheila Weinberg, founder of The Institute for Truth in Accounting, studied all 659 comments on rule changes that will affect whether politicians finally have to admit at least in small part the magnitude of our municipal and state pension crisis. She said Tuesday, '95 percent of the comments came from people who have a direct vested interest in governments concealing the true costs.'" (The Franklin Center for Government and Public Integrity)
A Better Answer to the Actuarial Discount Rate Debate (PDF)
"[The] article presents a fresh perspective on actuarial discount rates and understanding pension risk." (International Foundation of Employee Benefit Plans via Cheiron, Inc.)
[Guidance Overview] IRS Clarifies Application of All Events Test to an Employer's Bonus Pool Liability
"The IRS issued Rev. Rul. 2011-29 last week, which clarifies the IRS position regarding a taxpayer's ability to accrue in the year before payment its liability for bonuses under a program creating a bonus pool and resulting in a liability to a group of employees." (Miller & Chevalier Chartered)
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