When it comes to pensions and benefits, just about everything the U.S. does has some impact on plan sponsors here. Take the new accounting rules recently issued by the Financial Accounting Standards Bureau(FASB)in the U.S. They require employers to report the funded status of their singleemployer defined benefit pensions and other post-retirement benefit plans directly on their balance sheets. Past standards only required an employer to disclose the funded status in the notes to their financial statements.
Not only will many Canadian firms be required to comply with the U.S. standards, but Canada’s Accounting Standards Board is expected to follow suit, bringing its guidelines in line with FASB’s. Our Pension Planning column looks at the implications for Canadian companies.
While the accounting standards of Canada and the U.S. are on the way to being made consistent, the legal and tax regimes—and even the cultural expectations— governing compensation practices and pension and benefits plan design in the two countries differ significantly. These differences create unique challenges for Canadian companies operating on both sides of the 49th parallel, as our feature article discusses.
Although residing next to the world’s largest economy can have its downsides, there are also benefits. Because the pachyderm to the south is older and bigger than us, it has a great deal more experience from which we can learn.
For instance, the new Pension Protection Act signed into law by President George Bush last August, is the American government’s response to many of the same challenges faced by Canadian pension plan sponsors. The Act includes a new system for determining minimum funding requirements for defined benefit plans, provisions for automatic enrolment into defined contribution plans, and guidelines for offering tailored investment advice to DC plan members. But the legislation has its flaws and certainly doesn’t solve all the problems facing American pension plans, as our cover story discovers.
As the closest neighbour of the U.S., we have the benefit of being able to sit back, take notes and—if we’re smart—avoid their missteps and leverage their successes.
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