Audit & Accounting

As we all know from all of the hoopla, there are some 77 million Baby Boomers headed toward retirement. As a result, every facet of corporate pension plans will now be subject to deep analysis and probably change. Keep in mind that the decline in defined benefit plans and the rise in defined contribution plans, along with increased longevity of one’s life, have started to create a growing risk among employees about their retirement benefits. The Conference Board has just issued a report, Pensions and Retirement Conference, which delved into this topic and noted that as retirement benefits are redesigned for today’s retirees, it’s become unclear whether employer programs can support long-term financial security. “The changing definition of retirement raises controversial questions, especially from a societal point of view. What is the responsibility of the corporation to provide a safe and secure retirement for its employees? The evolving social contact between employees and employers has resulted in many issues that plan sponsors, policymakers, and academics need to resolve.” In short, the report is asking employees, who it believes should be seen as consumers, not investors, to take on significant risks that they haven’t a clue on how to manage. For one, the report sees a pension and retirement dilemma. It notes that many experts disagree over whether the new rules for defined benefit plans (see “Pension Protection Act of 2006”) will help stabilize the system or encourage more companies to curtail their plans. Keep in mind that as more companies discontinue their defined benefit plans, they’ll need to change their overall retirement programs so that they work more effectively for employees. You’ve then got a twofold risk here: (1) Employees could outlive their retirement income and experience a significant decline in their standard of living. Many people simply underestimate their life expectancy and overestimate how much money they can draw from savings. (2) Employees are investing more than they should in equities, due in part to the limited options for their defined contribution monies, inflation, and market volatility. Then, you have to take a gander at redefining retirement along with mitigating risk. Remember, today’s aging Baby Boomers are the best educated, healthiest, and longest-living group to ever entire retirement. According to Anna Rappaport, senior fellow on pensions and retirement for the Board, when surveyed, seven out of 10 people in this population say that they want to continue working in retirement. Given these new parameters, she notes that new definitions and innovative employment options must be created for this phase of life. She calls it the “third age.” Finally, she points out that policymakers, employers, and individuals need to rethink how retirement fits into the way people actually live their lives. For further information or to request a copy of the report, e-mail courter@conference-board.org.

Accounting firm Berkowitz Dick Pollack & Brant said its $50,000 contribution would help provide four-year college scholarships for 30 low-income at-risk children in Florida.

Sen. Joseph Lieberman, I.-Conn., has written a letter to the Internal Revenue Service asking for an explanation of its investigation of a speech by Sen. Barack Obama, D-Ill., at the United Church of Christ.

Corporate volunteering has hit a new phase. It's gone global.

Seymour Mann, co-founder of Mann Frankfort Stein & Lipp Advisors, which later became UHY Advisors TX, has died at the age of 87, only a few weeks after announcing his retirement from the firm he co-founded in 1971.

Sarbanes-Oxley has led to big improvements in audit quality, according to a newly released survey.

Deloitte & Touche's statements in an audit released last year of Bear Stearns may have given investors an inkling of the trouble to come at the investment firm, which was acquired this week by JPMorgan Chase for $2 a share in a Federal Reserve-backed deal that has averted a likely bankruptcy.

The California Society of CPAs said it would begin an educational initiative to help its 31,000 members cope with International Financial Reporting Standards.

By the time this column appears, CPAs everywhere are going to be tackling stacks of paperwork for income taxes. This will be true whether they are up to their necks in client returns, or struggling in an audit to reconcile book and tax income in Schedule M.With those pains in mind, it only makes sense that accountants would prefer GAAP accounting for income taxes to be relatively simple.

When it comes to financial or retirement planning or wealth management, no two clients are even remotely alike. Each comes with a different level of existing investments or retirement plans; each has different life goals and a different appetite for risk.Sorting out these variables in a basic analysis of the client’s position is the first step toward crafting a cohesive and effective plan. Unfortunately, no single software package or tool kit can easily handle the full range of analysis that may be required, so the planner will generally require several different kinds of tools.