Comment letter on pension legislation (June 26, 1998)

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American Academy Of Actuaries' Pension Committee

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June 22, 1998The Honorable Bob GrahamUnited States SenateWashington, DC 20510Re: Modification of Timing of Plan ValuationsDear Senator Graham:The American Academy of Actuaries Pension Committee has the following comments regarding styour proposal (Section 506, Retirement Security for the 21 Century Act) to amend the InternalRevenue Code and allow plan sponsors to utilize prior year data in determining current yearpension contribution requirements. The Academy, which does not support or oppose specificlegislation, believes your proposal would have the effect of significantly simplifying theadministration of some pension plans. We offer supplemental suggestions below, designed toextend simplification of pension plan valuations more broadly, consistent with the policyobjectives of your proposal. Your proposal’s modification of pension funding rules would provide pension plan sponsorswith much of the flexibility currently afforded by the Financial Accounting Standards Board andthe Securities and Exchange Commission in determining pension expense for purposes ofStatement of Financial Accounting Standards No. 87 (“SFAS 87"). The carefully controlled useof prior year participant (“census”) and financial data enables a plan sponsor to determine itspension expense (or contribution) prior to, or early in the year, thereby providing employersadditional lead time for financial planning, and reducing compliance costs.Your proposal would be available to any ...

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