Pension Accounting

On March 31, 2006, the Financial Accounting Standards Board (FASB) issued an exposure draft on Pensions that would call for a major overhaul of the way U.S. companies account for pensions and other post-retirement benefits such as health care. The proposal requires that both public and private companies account for the deficits or surpluses in their pension and other post-retirement plans onto their balance sheets. For a pension plan, the benefit obligation would be the projected benefit obligation; for any other post-retirement benefit plan, such as a retiree health care plan, the benefit obligation would be the accumulated post-retirement benefit obligation. Currently, this information appears in footnotes to financial statements. The standard would not affect a company's earnings but would allow investors to see the effect on the balance sheet of post-retirement obligations to employees. The proposal is subject to a 60-day comment period, and FASB could issue a final standard in the 3rd quarter of this year. This standard would become effective for most companies in 2007.