Pension Risk Matters

Signed on June 25, 2010 by President Obama, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act (H.R. 3692) allows plan sponsors to amortize funding gaps over a longer period of time than is currently allowed. In addition, this legislation enables funding relief for up to two years.

While the financial markets have not been kind to more than a few defined benefit plans, new rules are going to make it even more difficult for financial statement users to assess the true economic health of any given retirement arrangement. This is not a good thing. Beneficiaries and shareholders alike deserve user-friendly information, especially if a plan is in trouble. The new law will make things even more challenging in terms of deciphering reported numbers and that's saying something.

As I wrote in "The Plan That Didn't Bark" (CFA Magazine, March-April 2008), financial analysts and other interested parties must learn to think like detectives. The current state of pension accounting is far from perfect. Taking into account the likely impact of H.R. 3692, published funding information is going to be clear as mud.

Click here to access the full legislation. Clear to read "The Plan That Didn't Bark" by Dr. Susan Mangiero. (Editor's Note: Pension Governance, LLC is now part of Investment Governance, Inc.)