Mercer had a number of comments on FASB's proposal (“Proposed Financial Accounting Standards Board Staff Position 132(R)-a: Amendments to SFAS #132(R): Employers’ Disclosures About Pensions and Other Postretirement Benefits”).
“We applaud the FASB’s decision to provide financial statement users with more thorough information about pension and other postretirement plan assets and their associated risk,” said Mercer retirement actuaries Jim Verlautz and Ethan Kra in their letter. “The proposal is a good initial step, but we believe certain aspects should be adjusted in order to provide the most useful information in a cost-efficient manner.”
Specifically, the letter states:
The most useful aspect of the proposed disclosures will be to provide information to assess financial risk to the plan sponsor. But Mercer believes “significance” of risk, under the proposal, should be qualitatively defined in terms of the plan sponsor’s financial position, not by the plan’s assets. If the retirement plans pose a significant risk to the employer, the footnotes should discuss how that risk is being managed.
Thus, Mercer believes that significant asset categories and risk concentrations should be determined relative to the employer’s total operations – not the just the plan’s asset base.
Mercer recommends delaying the effective date one year (to fiscal years ending after Dec. 15, 2009) to facilitate changes to data collection systems and to allow for thorough testing of new reporting systems.
The proposal is another step in FASB’s comprehensive review of accounting for pensions and other postretirement benefit plans. Over the next several years, the FASB is expected to make additional, more substantial changes to accounting for these plans.
The full text of Mercer’s comment letter, containing detailed recommendations, may be read on Mercer’s web site at www.mercer.com/fsp.
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.