March 16, 2004
BB 04—31

FASB Issues Tentative Decision on Cash Balance Plan Accounting

In a March 3 decision, the Financial Accounting Standards Board (FASB) opted tentatively to institute a "hybrid approach" for determining obligations for cash balance pension plans, particularly those that use a variable, or market-related, interest crediting rate. This change in the accounting standard could lead to significant increases in pension liabilities.

Under this hybrid approach, the obligation stemming from a cash balance plan with a fixed interest crediting rate would continue to be accounted for under current FASB standards, according to FASB Statement No. 87 (FAS 87), "Employers' Accounting for Pensions." Thus, the obligation would be measured by projecting participants' account balances to the expected date of termination using the plan's fixed interest crediting rate, then discounting the projected amount by using the FAS 87 discount rate. However, liabilities for cash balance plans with variable crediting rates would be measured "by reference to the notional account balance," according to a FASB staff summary and thus would equal the sum of the participants' account balances. Mercer Human Resources Consulting has prepared a brief summary of the issue, detailing the potential impact of this decision on cash balance plan sponsors.

The board hopes to issue a final interpretation of Statement No. 87 with regard to cash balance plans later in the year. For more information, contact Diann Howland, Council vice president, retirement policy, and Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

Recording of Benefits Briefing on HSAs Now Available for Purchase

On Thursday, March 4, the Council will hold a Benefits Briefing conference call to discuss Health Savings Accounts (HSAs), created as part of the recently enacted Medicare legislation. HSAs allow employers, individuals, and family members to contribute to an account used to pay for medical expenses in conjunction with a high deductible health plan. The Council prepared a PowerPoint presentation to accompany the discussion.

A CD recording of the Benefits Briefing is available for $50.00, payable by check or credit card (using the PayPal system). To purchase a copy, contact Jason Hammersla, Council communications associate, at (202) 289-6700.

The Council recently provided written comments to the Internal Revenue Service, commending the prompt publication of HSA guidance and suggesting a number of clarifications and modifications. For more information on the HSA issue, contact Susan Relland, Council health policy legal counsel, at (202) 289-6700.


The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.