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Employers must disclose more about pensions

By George Stein
Bloomberg News

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Under the rule, known as FASB Statement No. 132 (revised 2003), companies will have to identify the asset categories, such as stocks, bonds or real estate, in which they have invested pensioners' money and list the expected rate of return for each asset class.

Companies will also have to estimate how much they must pay pensioners in the current year and the amount that must be paid into the fund to keep it from running short. Complaints about pension-fund disclosures increased since 2000 as stock-market declines ate into plan assets but weren't reflected in earnings reports because of accounting requirements.

"You could have a decline in the stock market that would not show up in the balance sheet. People were critical because of all those smoothing mechanisms," said Peter Proestakes, who led the FASB project to rewrite pension reporting standards.

Standard & Poor's estimated that the amount by which pension funds were underfunded increased to $259 billion in 2003 from $212 billion for companies in the S&P 500 Index.

The total amount in S&P 500 pension funds grew to $1.06 trillion from $951 billion at the end of 2002, the credit-rating company said. In the same period, pension obligations rose to $1.32 trillion from $1.16 trillion, S&P said.

On Dec. 12, General Motors said stock-market gains and the sale of its DirecTV unit helped it eliminate most of its $19.3 billion U.S. pension deficit, the largest among U.S. companies at the end of last year. It said it will pay $1.1 billion less in pretax pension costs in 2004.

General Motors and Ford, the No. 2 automaker, racked up the biggest deficits among U.S. companies after promising lifetime benefits to hundreds of thousands of employees.

The new FASB standard will take effect for fiscal years ending after Dec. 15 and for the first fiscal quarter of the year following initial application of the annual disclosure requirements.

Copyright © 2003 The Seattle Times Company