Benefit News

Fair Value Option (FAS 159) does not eliminate COLI's advantages for funding Nonqualified Benefit Plans

August 7, 2007 - Under the Fair Value Option provided by Statement of Financial Accounting Standards No. 159 ("FAS 159"), from the Financial Accounting Standards Board ("FASB"), entities (including employers) may elect to measure many financial assets and liabilities at "fair value" for financial reporting purposes. Increases and decreases in value that traditionally have not been recognized until an item is sold may instead, by reason of making this election, be reflected in financial accounting earnings currently. This option will expand opportunities to use many financial assets to mitigate volatility in earnings without employing derivatives and engaging in the complex accounting associated with them. Promoters of asset classes that may compete with COLI as sources of funding nonqualified employee benefit plans have contended that the Fair Value Option will reduce COLI's relative advantages. However, COLI continues to offer many benefits compared to alternative investments.

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