Administration November 11, 2003

FASB Retreats From Partial Pension Accounting Rule

November 11, 2003 (PLANSPONSOR.com) - Defined benefit companies got a bit of a reprieve Tuesday from the nation's accounting rulemaking body with a decision that they can keep reporting annual plan changes using a longstanding format.

Reported by

Fred Schneyer

The decision by the Financial Accounting Standards Board (FASB), the private-sector group that sets US accounting standards, reverses the board’s ruling two months ago, according to a Dow Jones report. The actions came at a FASB board meeting in Norwalk, Connecticut.

Under the rules initially proposed, companies would have had to replace the information they now provide in the standard format by reporting various pension details in other ways. But retirement plan sponsors, actuaries, analysts, and other pension experts overwhelmingly objected to dropping the longstanding format, known as a reconciliation. FASB received about 90 comment letters on the pension proposal and had extensive conversations with actuaries, ratings agencies, analysts, financial services firms, and others.

FASB board members also voted Tuesday on other changes to its earlier proposal. The wider pension reporting proposal issued in September called for companies to provide more information about assets held in pensions and to explain the interest rates, expected asset returns, and other elements sponsors pick to calculate how much a plan is worth and how much it owes in future benefits.

It also would have required detailed reporting by companies about how much they expect to contribute to their pension plans in a given year, compared with how large a contribution they actually made. Ultimately, board members voted to scale back the amount of information companies will be required to report about pension contributions, and decided to push back the deadline for companies to comply with some of the new disclosures.

The board is making final changes to the September proposal. A goal is to beef up corporate disclosure of pension finances, giving analysts and investors a better grasp of how traditional retirement plans affect the earnings of their corporate sponsors.

The FASB has said it wants to put out a final pension disclosure rule – changing the way companies have reported on their plans for decades – by December.