Administration August 10, 2005

More Disclosures on Pension Accounting Probe List

October 20, 2004 (PLANSPONSOR.com) - Northwest Airlines, General Motors, Delphi Corp. and Ford Motors have admitted that they have received requests from the Securities and Exchange Commission (SEC) for information regarding their pension and post-retirement employee plans.
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The SEC is looking into whether some companies were overly aggressive in forecasting future pension investment returns and made with an eye to enhancing companies’ profits and balance sheet figures, according to a Business Week report released last week (See  SEC Scrutinizing Pension Fund Assumptions ).

The Business Week report said areas of SEC concern include:

  • assumptions about the rates of return that pension funds can earn;
  • the level of eventual obligations pension funds must meet, determined by discount rate assumptions; and
  • the level of health care cost inflation and retirees’ medical benefits.

Responding to the informal inquiries, all companies said that they were replying with the SEC’s requests.

“We received an informal request for information from the SEC on the accounting of our pension and post-retirement benefit plans,” Northwest Airlines officials said on a conference call, according to Bloomberg News. “We believe our accounting practices are sound and are cooperating with these requests.” Other companies echoed this sentiment.

In total, the SEC says they are investigating six companies for possible accounting abuses regarding employee pension funds. The remaining two companies have yet to offer up their identity.

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