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August 17, 2010 at 08:00 PM
If U.S. pension accounting rules were more honest, many sponsors would replace their current plans with group annuities.
Pension specialists at Oliver Wyman and Mercer, units of Marsh & McLennan Companies Inc., New York (NYSE:MMC), have published that conclusion in a commentary on pension earnings reporting.
U.S. pension performance “smoothing” rules help add about 4% to the earnings of all S&P500 companies, 18% to the earnings of S&P500 materials companies, and 11% to S&P500 industrial companies, the pension specialists write.
Sponsoring a defined benefit pension plan without using a annuity amounts to operating a volatile derivatives business, the specialists say.
