By ADAM GELLER
AP Business Writer
t may sound arcane, but a planned over-
haul of the way companies keep their
books on pensions and retiree health care
plans could come at a very real cost to work-
ers counting on those benefits.
The changes _ likely to begin by year's
end _ come as a growing number of compa-
nies freeze pensions and cut retiree health
benefits, shifting risks and costs to workers.
In recent weeks, IBM Corp. and Verizon
Communications Inc. have joined the list
of those announcing they will freeze their
pension plans. On Monday, aluminum giant
Alcoa announced it will no longer offer pen-
sion benefits to most U.S. salaried employees
it hires beginning March 1.
But some experts say new regulations
requiring companies to more accurately cal-
culate and show the cost of their retirement
promises could speed up the move by employ-
ers away from guaranteed pensions and other
benefits.
"Changing accounting rules can cause
companies to change their behavior," said
David Zion, an accounting analyst with Cred-
it Suisse First Boston.
Rules now in place give companies cover.
Many have made expensive retirement prom-
ises without putting aside all the money need-
ed to meet them. But they don't have to fully
disclose the shortfalls in their earnings state-
ments or on their balance sheets.
Instead, firms can post very positive num-
bers based on assumptions about investment
returns, when the actual returns would hurt
their results. And while companies are required
to disclose pension figures in footnotes to
financial statements, even those can be dif-
ficult to decipher.
"If you change those rules you take that
protection away and our thinking is a com-
pany may have to go out and protect them-
selves," Zion said.
The question is how quickly that will
happen and how transparent it will be given
the rapid cutbacks in benefits already under
way.
By law, companies can cut retiree health
benefits at any time, as long as the changes
don't discriminate. They can't yank pen-
sions, but can freeze pension plans. Such
moves leave workers eligible for benefits
already earned, but halt gains they would
have been entitled to in later years on the job.
Other firms have closed pension plans to
newly hired workers.
Many companies freezing pensions say
they are bolstering 401(k) plans, making set
contributions while leaving workers to man-
age for their own retirement. Small firms
started the trend, but in the past year some
large employers followed suit in freezing pen-
sions for at least some of their workers, includ-
ing Sears Holding Corp. and Hewlett-Packard
Co.
Pensions and other retirement benefits
have stirred controversy in accounting circles
for years. Critics say while companies made
expensive promises to workers, accounting rules
let them engage in a shell game and mislead
investors about the value of stocks, bonds
and other assets held by pension plans. While
they can fluctuate widely, the rules let com-
panies smooth the numbers, creating distor-
tions in their balance sheets that can make
a whopping liability look like a sizable asset.
That led the Financial Accounting Stan-
dards Board _ which sets U.S. accounting
rules _ to announce late last year that it
planned an overhaul.
"While the accounting and reporting
issues do not appear to lend themselves to a
simple fix, the board believes that immedi-
ate improvements are necessary," FASB Chair-
man Robert Herz said.
The changes will come in two steps, the
group said.
By year's end, FASB says it likely will
require companies to report the funding sta-
tus of pension plans and other retirement
benefits _ showing how much those plans
contain compared to what is owed to work-
ers _ on their balance sheets.
A second phase of changes would reach
much farther and take several years. Those
changes would require companies to more
accurately measure and report their retire-
ment benefits, and include those costs in cal-
culating their profits.
For some companies, the change in their
reported financial condition would be stark.
The most widely cited example is Gen-
eral Motors Corp., which has been staggered
by both slowing sales and mammoth obliga-
tions to workers and retirees. If GM was
forced to accurately show its true benefit
costs on its balance sheet, the company's
book value _ the difference between its assets
and liabilities _ would have been cut from
$27.7 billion in 2004 to a negative $18.5 bil-
lion, according to Credit Suisse estimates.
The changes are likely to stir far more
controversy than FASB's requirement that
companies account for stock options, partly
because of their perceived impact on Main
Street, said Janet Pegg, an analyst for Bear
Stearns.
"It definitely could be a bigger deal," Pegg
said. "Stock options were often thought about
as compensation given to top executives who
were making significant salaries, whereas the
view when you get to pensions is of grandma
and grandpa sitting at home collecting their
pension checks."
When companies _ under pressure from
Wall Street to report steady, predictable prof-
its _ are forced to take big charges against
their profits because of the volatilities of their
pension plans, more firms could decide they've
had enough, analysts say.
That may not happen this year, although
some companies could blame the new rules
in coming months as they announce pen-
sion freezes or cutbacks in retiree health care
already being planned.
But as the second phase of the account-
ing overhaul is completed, "that's going to
be a more substantial change," said Don
Fuerst, a retirement consultant and actuary
with Mercer Human Resource Consulting.
"That's going to drive a lot more companies
to reconsider how they do this."
Of course, new rules won't change the
reality of what companies owe their work-
ers or how much they've put aside. But Cred-
it Suisse's Zion points to the early 1990s,
when FASB began requiring companies to
put a value on the retiree health care prom-
ises they had made. Within a few years, the
number offering those benefits had dropped
sharply.
"Not to blame the rules," Zion said, "but
you change the rules and it provides a real-
ization of the real economics."
Overhaul in accounting rules could tighten squeeze on pensions
o one likes to think about death or
make funeral arrangements when griev-
ing for a loved one who has just passed on. Yet,
when that dreadful day arrives, someone has
to do it, and decisions have to be made quick-
ly and often under great emotional distress.
And, like it or not, death is a costly affair.
According to Funeralplan.com, a free
online consumer information and educa-
tional resource on funeral planning, funerals
rank among the most expensive purchases
many consumers will ever make. A tradi-
tional funeral, including a casket and vault,
costs about $6,000, although extras like flow-
ers, obituary notices, acknowledgment cards,
or limousines can add thousands of dollars
to the bottom line. Many funerals run well over
$10,000. That's why many choose to pre-
plan and prepay their own funeral.
Preplanning allows you to compare prices
and services so that, ultimately, the funeral
reflects a wise and well-informed purchas-
ing decision, as well as a meaningful one.
When you prearrange, you have control over
the decisions relating to your death -- the dis-
position of your body, the funeral or memo-
rial service and what you want your obituary
to say about your life. You also relieve your
family of having to make important financial
decisions during a period of great stress and
grief -- a time when people aren't thinking
very clearly and may not know what to do
because you never made your wishes known.
Preplanning your funeral can be as formal
or as informal as you want it to be. It can be
as simple as following a preplanning check-
list and sharing your wishes with a family
member, or it can be made in the form of a
preneed contract, which can be set up with
a funeral director and prefunded through life
insurance, a bank trust agreement, or anoth-
er method. When done properly, preplan-
ning your funeral can give you peace of mind.
Below are some guidelines to follow, cour-
tesy of Funeralplan.com, should you decide
to preplan and prepay your funeral.
1. Plan the actual funeral. Shop around
and talk to a few funeral directors. Compare
prices for such things as a casket, embalming
and the cost for professional services. Resist
one-stop shopping, which can include such
things as prayer cards, thank-you notes and
guest registers -- they add up quickly. Many
opt for a funeral home in their neighbor-
hood for personalized services.
2. Decide on body disposition. Do you
want to be buried or cremated? If you want
an earth burial, a cemetery plot needs to be
purchased; if above- ground, a mausoleum
crypt. If cremation is your choice, make a
plan for how you will dispose of the ashes. Do
you want them stored in a columbarium niche
or buried? Maybe you prefer to have your
ashes scattered. An option some people take
is to donate viable organs and tissues to a
medical school.
3. Decide on the type of ceremony. You
may want a traditional funeral service with
visitation and a member of the clergy con-
ducting services at a church or a funeral
home. Will you want an open or closed cas-
ket? Maybe you want a special friend to do the
eulogy or family members to read scripture pas-
sages or poetry. Any favorite hymns? If you
would rather have a memorial service (a serv-
ice in the funeral home or a church where the
body is not present), express that wish. A
common misconception is that when a body
is cremated, you don't hold a funeral. You
can hold a funeral before cremation if you
want to.
4. Tally the total cost of the funeral. Tally
all costs, which will probably be consider-
able, and decide about prepaying with bank
savings, trusts, life insurance, or annuities.
Some of the costs involved include:
· Basic services fee
for the funeral director
and staff -- a fee that
customers cannot decline
to pay that includes serv-
ices common to all funer-
als regardless of the spe-
cific arrangement: funeral
planning, securing the
necessary permits and
copies of death certifi-
cates, preparing the
notices, sheltering the
remains, and coordinat-
ing the arrangements with
the cemetery, crematory
or other third parties.
The fee does not include
charges for optional serv-
ices or merchandise.
· Charges for other
services and merchan-
dise -- costs for option-
al goods and services such
as transporting the
remains; embalming and
other preparation; use of
the funeral home for the
viewing, ceremony or
memorial service; use of
equipment and staff for
a graveside service; use
of a hearse or limousine;
a casket, outer burial con-
tainer or alternate container; and cremation
or interment (the act of placing a dead body
in a grave).
· Cash advances -- fees charged by the
funeral home for goods and services it buys
from outside vendors on your behalf, includ-
ing flowers, obituary notices, pallbearers, offi-
ciating clergy, organists and soloists. Some
funeral providers charge you their cost for
the items they buy on your behalf. Others
add a service fee to their cost, which they
are required to disclose to you in writing,
although they are not required to specify the
amount of their markup. Funeral providers are
required to tell you if there are refunds, dis-
counts, or rebates from the supplier on any cash
advance item.
5. Draw up a will. Regardless of how much
or how little wealth you have, it's important
to have a will unless you want the state to take
over after you die. Have a lawyer draw one up
for you. Organize all the papers and impor-
tant documents you'll need to take with you
to the lawyer. Your will is an inventory of
all that you own -- real estate, bank accounts,
stocks and bonds (if any), annuities and life
insurance. List your personal property, such
as jewelry, paintings, and collectibles, and
specify who gets what. Be clear about the
distribution of your assets, but don't forget
to list your liabilities -- mortgage, loans and
credit cards. Sign your will and have it wit-
nessed by two people with their correct
addresses included (should they be summoned
by the court). You will need to designate an
executor to administer your will after you
die. And, if drawn up by a lawyer, the orig-
inal copy will be filed at his or her office. A
duplicate copy should be kept in a safe place
where survivors will find it -- like a safe
deposit box. (Remember: Whatever is in
your will is not set in stone. You can make
changes to it any time you want.) MM05C010
James J. De Vaney
John Michael De Vaney
Jamie Kaim
Funeral Directors
De Vaney - Bennett Funeral Home
"Serving the Geneva area for over 108 years"
181 N. Main St. · Geneva, NY · 315-789-2224
Dedicated To Serve...
539-2496
539-2496
Mull Funeral Home, Inc.
113 Virginia St. · Waterloo
Funeral Preplanning
Let Our Family, Help Your Family
Generations of Caring
www.mullfuneralhome.com
K
C
M
Y
K
C
M
Y
6
January 29, 2006
Secure Your Future
The Citizen, Auburn, New York
The Citizen, Auburn, New York
Secure Your Future
January 29, 2006
7
How to preplan and pay for a funeral
N
I
