U.S. companies will have to begin providing details about the investment strategy they use for their employee pension plans, accounting rule makers agreed Wednesday.
Firms also will have to estimate and disclose the total amount of pension benefits they expect to pay to workers over the next five years, rule makers said.
The Financial Accounting Standards Board said it would order the changes as part of efforts to shine a brighter light on corporate pension programs, amid fears that many such plans may be inadequate to meet promised benefits.
The FASB said it would issue a final rule on the new disclosure requirements later this year.
Pension accounting and the often opaque and sparse information reporting on such plans have drawn scrutiny since the bear market in stocks from 2000 through last year pummeled retirement assets and forced many companies to divert cash to prop up their pension programs.
The FASB's proposed rules are part of a multifaceted regulatory effort to improve disclosure about traditional pension plans, known as defined benefit plans.
The Treasury Department this year proposed a rule that would require firms to match the expected rates of return on their pension investments to the expected payout of assets.
That would require a company with a large population of near-retirees to calculate pension growth using more conservative assumptions, because there would be less time for the pension balance to earn investment returns than if the firm had a younger labor pool.
That rule, controversial on its own, was part of a larger pension reform package that proved so unpopular with both business and consumer groups that it was pulled.
The FASB's action to increase disclosure is certain to draw fire from companies that argue pension accounting is already too complicated, analysts said.
"This is just another nail in the coffin of defined benefit plans," said Lynn Dudley, vice president and general counsel for the American Benefits Council in Washington. "It doesn't sound like a terrible thing to disclose what your investment strategy is, but it's like many things, the devil is in the details and the implementation."
Dudley said employers were concerned that additional disclosures could be used by employee groups to pressure companies to alter their investment strategies to suit a particular group's purpose. To bow to such pressure would violate pension rules that require employers to be fiduciaries, acting in the best interest of all participants.
In addition, smaller firms that already say traditional pension plans are too expensive and complicated could view added disclosure as another reason not to offer such plans, Dudley said.
Many companies over the last decade have favored defined contribution plans over defined benefit plans. Defined contribution plans, such as 401(k) retirement programs, allow workers to set aside a portion of pay in tax-deferred accounts. Many companies match a percentage of those contributions.
Defined contribution plans effectively shift the retirement-cost burden to workers, because companies' liability ends with their contribution to the programs -- unlike with defined benefit plans, which can require a company to make payments for as long as a retiree lives.