Administration January 23, 2009

GM Settles with SEC over Pension Accounting Charges

January 23, 2009 (PLANSPONSOR.com) - General Motors Corp. and the U.S. Securities and Exchange Commission reached a settlement Thursday over charges that the company improperly represented pension estimates in 2002.
Reported by

The Detroit Free Press reports GM was not fined by the SEC, but the auto giant agreed to follow SEC regulations in the future and is subject to a federal injunction under which it would face stiff penalties for any future violations. GM did not admit or deny any wrongdoing.

“The injunctive remedy should provide strong incentives for General Motors to maintain strong accounting and disclosure practices,” said Frederic Firestone, associate director in the SEC’s enforcement division, in the news report.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The SEC alleged in its 2004 lawsuit that GM made significant misstatements or omissions in a 2002 filing about its pension discount rate for 2002 and its expected return on pension assets for 2003. The complaint also alleged that GM failed to disclose material information about the timing and amount of its projected cash contributions to its pension plans, according to the Free Press.

GM said it made mistakes, but not with the intent to deceive shareholders.

The automaker recently agreed to pay about $39 million to settle a lawsuit over company stock investments in its 401(k) plan (see GM Settlement of Company Stock Suit to Include $39M Payment ). That suit claimed the company put its interests ahead of the interests of plan participants by continuing to offer GM stock as an investment option, matching employee contributions in GM stock, and failing to diversify the stock fund when it was clear GM stock was not a prudent investment during the time GM was struggling financially and its accounting was being reviewed by the SEC.

Administration January 22, 2009

Longevity Could Increase Pension Liability by $250B

January 22, 2009 (PLANSPONSOR.com) - A recent report from Hewitt Associates suggests companies across the world should factor in up to $250 billion more in pension liabilities now that people live longer.
Reported by

According to Reuters, the report noted that longer life spans could add up to 15% to the current estimated pension liabilities of defined benefit pension schemes. European companies, especially in the UK, recognize longevity risk more so than their counterparts in other parts of the world, Hewitt found.

UK plans typically assume five to six years additional lifespan compared with other countries the report said, according to Reuters. In the UK they say longevity improves by about three to four months each year.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

In addition, Hewitt found companies tend to overlook their pension schemes’ exposure to currency risk which could increase their deficit further, by up to 30%. More than one-third of companies ranked currency as the lowest pension risk exposure, although many of them have established mechanisms to deal with currency risk in their company results.

Hewitt’s report was based on its summer 2008 survey of 171 plan sponsors in 12 countries (see Canadian Sponsors Still Underprotected on DB Risks ).

«