Companies Must Reveal Pension Information

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Companies Must Reveal Pension Information

The Associated Press

March 12, 2004

Aetna, Honeywell and DuPont. Each has a pension plan worth billions of dollars. Now, the world can see for the first time where those big bucks are invested.

A new rule that kicked in this month requires any company with a traditional retirement plan to file reports on its pension investment strategy.
Though a company doesn't have to say exactly which stocks its pension holds, it must tell for the first time what share of the plan is invested in stocks, bonds, real estate and other vehicles. It must also give new information about how much cash and stock it expects to pump in.

Among recent revelations, for example, is that while Aetna Inc.'s $3.5 billion plan is smaller than the Honeywell International Inc. or DuPont Co. plans, it had a bigger share of its pension assets — 66 percent — in stocks last year.

The new data offer an intriguing peek under the hood for investors, economists, analysts, lenders and others who track companies and markets.

"Pension assets represent an enormous amount of money, and these new disclosures are giving the public a better handle on how companies are managing them," said Howard Silverblatt, an equities analyst and ratings agency Standard and Poor's. S&P is tracking the new disclosures and plans to publish a report on them soon.

Until now, the corporate pension plan has been like a financial black box to outsiders. Accounting rules have required only sketchy information annually from companies, despite the fact that pension funds often are huge.

That started to change when big companies including General Motors Corp., Ford Co. and International Business Machines Corp. announced in 2002 that their pensions were underfunded, sometimes by billions of dollars.

A bear market combined with low interest rates to produce an underfunding epidemic that forced many to make big cash infusions.
In the ensuing uproar, Wall Street firms and regulators demanded that accounting rules be changed to make the plans more transparent.

The Financial Accounting Standards Board, which sets U.S. accounting standards, issued a rule in December requiring the expanded reports.