At your request, we have provided this letter to summarize the accounting rules governing the liability recorded on the financial statements of the IBT for the Teamster Affiliate Pension Fund (the Plan). Prior to December 31, 1994, all contributions were made to the Plan by the IBT. In 1994 the General Executive Board elected to curtail the Plan effective 12/31/94, freezing benefits for most participants at the then accumulated level. The curtailment gain was accounted for in the IBT's 1994 financial statements in accordance with Statement of Financial Accounting Standards No. 88 Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits- FASB 88. The IBT remained responsible for the Plan liabilities accumulated to the date of the benefit curtailment. The IBT continues to report for its liabilities for the Plan in accordance with Statement of Financial Accounting Standards No. 87 Employers' Accounting for Pensions- FASB 87 based on calculations performed by the plan's actuary. The liability reflected on the financial statements of the IBT under FASB 87, does not equal the funded status of the Plan. The IBT financial statements disclose a reconciliation of the accrued pension liability to the Plan's funded status. A significant factor in this reconciliation is the unrecognized net gain or loss. FASB 87 requires pension accounting be determined on the expected long-term rate of return on plan assets and the market-related value of plan assets. In recent years the Plan, as have many other pension plans, has experienced investment returns greater than the expected long-term rate of return, which results an asset gain. As these are long-term projections, the asset gains (or losses) are recognized over future years in accordance with FASB 87 based on calculation by the plans' actuary. In conclusion the accrued pension liability for the Plan is reported properly in the IBT's financial statements in accordance with the appropriate guidance provided by FASB 87 & 88 and the actuarial calculations performed by the Plan actuary. Sincerely, Stephen R. Leser Partner |