pac_fasbed1_053106.pdfVIP

May 31, 2006 Technical Director Financial Accounting Standards Board 401 Merritt 7 Norwalk, CT 06856-5116 Re: File Reference No. 1025-300. Proposed Statement of Financial Accounting Standards — Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) Dear Sir or Madam: On behalf of the American Academy of Actuaries’ Committee on Pension Accounting,1 I commend the Board on its decision to pursue a thorough reconsideration, consistent with its other broad commitments, of pension and other postretirement benefit (OPEB) accounting, which in its current form lacks transparency. In this letter, we repeat, for the most part, comments made in our February 10 letter on the subject to Mr. Robert Herz.2 We are sympathetic to the Board’s decision to break the project into phases, with Phase 1 limited to recognition issues and Phase 2 devoted to the more difficult measurement issues. However, we are concerned about the Board’s decision to use the projected benefit obligation (PBO) under Statement of Financial Accounting Standard 87 (SFAS 87) to measure a balance sheet pension liability. We believe that the PBO is inconsistent with the common understanding of a balance sheet liability. The accumulated benefit obligation (ABO) represents, at least during Phase 1 of the project, a more appropriate measure.3 A temporary use of the PBO as a balance sheet liability may be reversed on reconsideration in Phase 2, but undue damage to companies and plans will already have occurred. On another matter, although we agree with the Board’s conclusion that eliminating prior measurement dates would generally improve transparency, we have found instances where using a later measurement date would require greater reliance on estimates and thereby result in less, rather than greater, transparency. 1 The American Academy o