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FASB Proposes New Rule On Cash-Balance Plans

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NU Online News Service, Sept. 26, 2003, 2:50 p.m. EDT – The Financial Accounting Standards Board in Norwalk, Conn., says it will study how employers account for cash-balance pension plans and may ultimately change its rules governing such plans.

FASB says the project will look at ways to measure employers’ obligations under cash-balance pension plans. It announced the project on its Web site Thursday.

“Current accounting guidance does not specifically address the types of benefit arrangements that exist in many cash-balance pension plans,” FASB explains.

The main goals of the project would be to define what a cash-balance plan is and to provide an accounting method that employers can use consistently to measure their pension obligations to employees.

The proposed changes would require plan sponsors to provide detailed financial statement to beneficiaries, breaking down plan assets by such categories as equity, debt and real estate.

“The expected rates of return and target allocation percentages, or target ranges, for these asset categories also would be required in financial statements,” FASB says.

The statements would also have to project future benefit payments and estimate contributions to be made in the next year to fund the pension plan.

If adopted, the rules would be effective for fiscal years ending after Dec. 15 and for the first fiscal quarter of the year following initial application of the annual disclosure requirements, FASB says.