AICPA urges expanding pension disclosures to workers.
The AICPA argued many Americans don't know the condition of their pension funds or how to find this information.
"It's no secret certain segments of the pension system are in trouble," said AICPA chairman Jake Netterville. "But to millions of Americans, the real facts about their own pensions are not known. Every employee should know whether his or her pension plan is fully funded, whether its investments are sound and whether the government will pay the promised benefits if the employer can't."
The AICPA proposals call on the Department of Labor to enhance the information companies provide to employees in the summary annual report (SAR)--the one source of information most pension plans are required by law to furnish annually to participants.
The SAR currently includes such information as plan asset values, income and expenses. However, it fails to make other disclosures the AICPA contended are essential to evaluating the financial soundness of a plan, including
* How much the plan has promised to pay participants.
* Whether the plan is currently funded to make good on these commitments.
* Whether plan benefits are insured by the government's PBGC.
* The quality of the plan's investments.
Under the AICPA proposals, the Labor Department would require company pension plans to make these and other disclosures to employees in plain English. To ensure compliance, employers would be required to notify the Labor Department they had done so.
Moreover, the AICPA said a gap in the information available to individuals covered by multiemployer plans (such as union-sponsored plans) also should be closed. Under current rules, employees do not have the right to find out the pension benefit they have earned.
The AICPA also recommended the following reforms, termed "long-overdue," to improve disclosures to workers:
* Pension plans should be required to inform employees of significant plan changes on a timely basis. Under current rules, the delay can be as long as 19 months.
* Pension plans' financial statements should disclose total amounts promised to participants more prominently. Currently, this information is contained in the financial statement footnotes.
* CPAs should perform only full-scope audits of pension plan statements. The law permitting plan administrators to limit the scope of pension plan audits should be repealed.
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|Publication:||Journal of Accountancy|
|Date:||Jul 1, 1993|
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