Cash balance pension plans: A case of standard-setting inadequacy |
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| Authors: | Paula B Thomas Paul F Williams |
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| Institution: | 1. Department of Accounting, PO Box 50, Middle Tennessee State University, Murfreesboro, TN 37132, USA;2. Department of Accounting, Box 8113, North Carolina State University, Raleigh, NC 27695-8113, USA;1. Department of Accounting and Auditing, HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany;2. Chair of Accounting and Auditing, HHL Leipzig Graduate School of Management, Jahnallee 59, 04109 Leipzig, Germany;1. National University of Singapore and ETH Zurich, Future Resilient Systems Program, Singapore;2. Singapore University of Technology and Design, Singapore;3. CNRS LIX, École Polytechnique, Palaiseau, France;1. School of Economics and Management, Lund University, Sweden;2. IPSAR, University of Edinburgh Business School, 29 Buccleuch Place, Edinburgh EH8 9JS, United Kingdom;1. The Bucharest University of Economic Studies, Faculty of Accounting and Management Information Systems, 6 Pia?a Roman?, Sector 1, Bucure?ti 010374, Romania;2. University of Birmingham, Birmingham Business School, Edgbaston, Birmingham B15 2TT, United Kingdom |
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| Abstract: | Accounting for and ownership of U.S. private employee pensions has long been a controversial and politically contested terrain. The uniqueness in the U.S. of using employers as the principal provider of pensions makes the reporting of pensions more problematic since the corporate employers providing pensions are not strictly accountable to only the pensioners. Over the last quarter century there has been a marked swing in power toward management and away from employees making it possible for increasing numbers of U.S. companies to switch from conventional defined benefit plans to cash balance plans. This paper provides a “case” study of how accounting standard-setters framed the pension reporting problem vis-à-vis how they frame the “reporting problem” in general. Utilizing various sources of commentary about the phenomenon of cash-balance conversions, we triangulate on the pension problem to demonstrate how current FASB disclosure rules fail to satisfy the condition of neutrality and how those rules have facilitated the shifting of economic risk from shareholders to employees. |
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