Benefits September 12, 2005

2000 Form 5500s Show Continuing DB Decline

September 12, 2005 (PLANSPONSOR.com) - The shift from defined benefit to defined contribution plans continued in 2000, with DB plans declining 4.1% from 50,000 in 1999 to 48,000 in 2000, and DC plans increasing 0.58% from 683,000 to 687,000.
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That was one of the findings of a recent report by the Employee Benefits Security Administration of the US Department of Labor (DoL) based on data collected from Form 5500 Annual Reports in 2000.

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The DoL researchers also found a significant rise in the amount of pension contributions made by employees. In 1978, 29% of contributions to DC plans, and 11% of total contributions to all DB and DC pension plans were contributed by participants. That compares with 2000 data showing that 60% of contributions to DC plans and 51% of contributions to all plans were made by participants.

Other findings include:

  • the number of active participants in DB plans decreased by about 2% to 22.2 million and the number of active participants in DC plans increased about 1% to 50.9 million between 1999 and 2000.
  • pension plan assets decreased nearly 5% from $4.4 trillion in 1999 to $4.2 trillion in 2000. DB plan assets decreased by 3% to $2.0 trillion, while DC plan assets shrank by 6% to almost $2.2 trillion.
  • in terms of the number of each type of plan in 2000, the DoL data found 735,651 total plans including 48,773 defined benefit plans. That included 1,290 cash balance plans. Meanwhile, there were 686,878 defined contribution programs including 566,196 profit sharing and thrift savings plans. Also in the DC column were 93,108 money purchase programs and14,473 403(b) plans.
  • of the $4.11 trillion in total net assets, $309,848,000 was in company stock, $32 million was out in participant loans and $11, 590,000 in real estate.
  • examining employer size, 301,170 of the 735,651 total pension programs of all types were at employers with two to nine employees, according to the DoL data.
  • companies with 10 to 24 workers had 166,928 plans and 91,723 plans were at companies with 25 to 49 workers. At the other end of the list, companies with 20,000 to 49,999 workers had 480 plans while those with 50,000+ worker companies had 198 plans.
Administration September 11, 2005

FASB Set to Consider Sweeping Pension Reporting Changes

November 9, 2005 (PLANSPONSOR.com) - The Financial Accounting Standards Board (FASB) is moving closer to its goal of revamping current reporting rules for pensions and other post-retirement benefits with a staff recommendation that companies be required to account for pension plan funding in calculating net worth.
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In material expected to be the topic of board discussion at Thursday’s meeting that was prepared by FASB staff members and posted on the  FASB Web site , the agency said the proposed stem to stern review of pension and post-retirement benefits is not expected to wrap up until the end of next year.

Staff members recommended that the board accomplish the pension reporting revamping in several phases, starting with deciding whether postretirement plans’ funding status should be accounted for in a company’s financial statement.

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During the first stage, staff members recommended the board require that:

  • companies recognize in their balance sheet a net postretirement benefit asset or a net postretirement benefit obligation for each sponsored defined benefit plan equal to the difference between plan assets measured at their fair value and the projected benefit liability (pensions) and accumulated postretirement benefits obligation (other postretirement benefits), measured as of the measurement date. FASB staff members asserted, “That would ensure an employer reports in the balance sheet the economic funded or unfunded status of its defined benefit postretirement plans.”
  • Changes in the fair value of plan assets and the benefit obligation that are not currently required to be recognized in earnings (unrecognized gains and losses) would be reported as credits or charges through other comprehensive income (OCI).
  • an intangible asset related to any unrecognized prior service costs be recognized consistent with the current requirements in Statement 87 when an additional minimum liability is recognized.

According the report, staff members recommend that FASB save the major rulemaking heavy lifting for the second phase of the project. That’s when the agency would “reconsider comprehensively most, if not all, aspects of the existing standards of accounting for postretirement benefits.”

The report said any FASB rule changes should be undertaken in concert with international accounting authorities who are developing new standards for companies around the world (See The Bottom Line: Let It All Hang Out ).

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