In February, among other things, FASB proposed that Statement 132 be amended to require disclosure of asset categories in which pension funds are invested based on the risks and expected long-term rate of return associated with each asset category. Its proposals also included a suggestion to amend Statement 132 to require employers to disclose input assumptions used in calculating the fair value of plan assets, similar to requirements of Statement 157 (See  FASB Proposes Greater Disclosure of Plan Asset Risk ).

SEI noted these changes could impact the overall pension management process, but will specifically impact the following two areas:

• Outside View of Risk May Be a Consideration in Asset Allocation Decisions – SEI said pension plan sponsors have historically made asset allocation decisions based on return objectives or a better match to liabilities while being comfortable with the level of risk the investment presented to the organization. Now, however, the sponsor must understand these decisions to a deeper level and be able to discuss their decisions with users of their financial statements. This will require the sponsor to have strong advisers that provide them with clear understanding of the investment choices and decisions.
• Risk Elevated as a Primary Factor in Investment Strategy Implementation – Risk has typically been a key factor in asset allocation decisions historically, but it takes on new importance with these changes, according to SEI. The proposed amendments do not tell exactly what measure of risk must be disclosed, but it can be assumed the usual measures must be considered. Additionally, information on concentrations in companies, industries, countries, etc. will also be required, increasing the importance of a portfolio having broad investment diversification across classes, industries, styles, and individual managers to manage risks.

According to the CFO Summary, early reports are that the FASB intends to have the new rule in effect by the end of 2008 with December 15th being the target date. SEI suggests that in preparation, CFOs should start to gain a clear and detailed understanding of:

• Pension portfolio diversification and overall risk as viewed by outside world,
• Impact of potential volatility on organizational finances,
• Strategies for investing in sub-asset classes,
• Accessibility of required information from current investment vendors,
• Organization’s risk reporting process, and
• Ways to better integrate the process to make meeting these disclosures easier.

More information from SEI regarding impacts from disclosure requirements can be found at http://www.seic.com/institutions .