Proposed accounting rules to relieve Dutch companies
NETHERLANDS - The Dutch Accounting Standards Board (RJ) has issued new guidance, which it is hoped will slow the trend of companies changing their pension arrangements into defined contribution plans.
Details of RJ's concept directive RJ271 suggests unlisted average-sized and large companies with average salary pension plans will not be required to show expected future salary rises as well as indexation on their balance sheets any longer.
In addition, companies with defined benefit schemes should be allowed to show actuarial calculations of their pension liabilities made every three years, rather than every year as currently required, in the RJ's opinion.
The RJ has demanded since 2005 all pension assets and liabilities be reported in accordance with the International Financial Reporting Standards (IFRS).
As a consequence, many companies have switched to DC arrangements, which transferred all risks concerning investment returns to the participants of their pension funds.
Gerard Verheij, pensions secretary of the large employers' representative body VNO-NCW told IPE "the proposals certainly mean an improvement of the present situation, but we want to be absolutely sure that pension risks are removed from companies", adding "therefore, we need more clarity on the wording".
Frans Prins, director of the Foundation of Company Pensions Funds (OPF) indicated he shared Verheij's opinion.
"I also welcome the RJ's clarification of the employers' obligations under collective defined contribution schemes," said Prins.
Verheij said he was also pleased with the proposal to reduce the frequency of required actuarial calculations.
"This will make a considerable difference in the administrative burden. However, it won't be the decisive factor."
That said, Verheij indicated he cannot judge whether the proposals will stop companies switching to DC schemes.
"This must be considered at a company level. Although the changes will help, companies also have other worries, such as the interest rates and developments on the equity markets," he pointed out.
OPF's Prins agrees with Verheij's view regarding the slowdown from DC, as he added: "The proposed new Dutch rules will help to slow down the trend to DC, but the ultimate wording of IAS19 will be critical in the long-term.
According to RJ project leader Cardi van Capelle, the RJ271 directive does not reach as far as the international directive IAS19.
"Under RJ271, the companies which participate in industry-wide pension funds are exempt from reporting their pension liabilities," explained Capelle.
The pensions secretary of VNO-NCW made it clear his organisation has started lobbying extensively the International Accounting Standards Board (IASB), in order to get the specific Dutch position on pensions also recognised in the IAS19.
The employers' organisation has not only appointed a direct representative, it has also found Social Affairs' minister Piet Hein Donner as well as former finance minister Gerrit Zalm willing to lobbying the IASB.
The consultation on the RJ's ‘concept directive' will be open until 15 September and the Dutch Accounting Standards Board then expects the final guidelines for Dutch companies to be issued later this year.
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