Volume 13, No. 15


Ugly OPEBs:  Surveying The S&P 500  A little more than two years ago, the financial world was a maelstrom: Enron and WorldCom were revealed to be houses of cards, and auditor Arthur Andersen evaporated along with its shifty clients. The auditing profession - or the accounting industry, to many - drew fire from investors and regulators as never before. At a time when the markets would have welcomed stability and a cool head at the SEC, the Commission offered neither: controversial chairman Harvey Pitt had recused himself from many decisions related to his former clients, the then-Big Five accounting firms. The SEC was in turmoil of its own,while investors wondered who and what the next accounting scandal would involve. The markets continued their bear behavior, begun when the internet bubble broke in 2000 - while interest rates simultaneously declined. The effect on pensions was the widely-cliched perfect storm: declining capital markets reduced the value of pension assets, while low interest rates plumped pension obligations. Investors took to studying pension footnotes with the ardor of a thirteen-year old discovering his dad's Playboy magazine collection. The SEC never really addressed specific pension issues during the Fall of Enron era, probably because there were so many other issues commanding its attention. Perhaps to make up for lost time, the SEC is now investigating pensions - and other postemployment benefit plans, as well. The pension issues of the S&P 500 have been addressed in a previous report; this one is devoted to their OPEB issues.

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