FASB Tightens Pension Reporting Noose

June 26, 2003 (PLANSPONSOR.com) - Plan sponsors with defined benefit plans will have to issue quarterly financial reports if the nation's accounting-rule-setting body has its way.

The Financial Accounting Standards Board (FASB) has tentatively ruled that public and private companies alike will have to tell investors and analysts whether they expect to change the amount they will contribute to a plan in a given year, according to the Associated Press.   At present, companies are only required to provide financial statements on retirement plans once a year.  

Under the proposed changes, employers would also have to reveal:

  • details about their investment returns
  • information about where their pension costs are concentrated throughout the company

FASB’s board also decided that companies should report the amount they expect to pay in future benefits as a dollar amount, rather than a formula based on bonds with which benefit obligations are calculated.

Too Speculative?

However, FASB’s board decided not to require retirement plan sponsors to provide projections of how their pension assets and liability would be effected by fluctuations in interest rates or equities markets, determining that such “sensitivity analysis” would be speculative and potentially misleading.

The new proposals are expected to become part of new pension disclosure rules that could go into effect as early as the end of this year.

The nation’s accounting-rule-making body agreed to add pension accounting and disclosure to its formal review agenda after receiving a plethora of complaints about current pension accounting standards and suggestions on how to enhance corporate disclosure (See  FASB Agrees To Look At Pension Accounting ).  Last month, FASB announced a preliminary decision to move in this direction (see  FASB Proposes Additional Pension Disclosures ).