Postretirement health benefits: Are corporations accurately estimating future cost trend rates?

Much attention has been paid to the FAS 106 requirement to change the accounting for retiree health care benefits from a cash to an accrual basis. But less noted was another disclosure requirement: health care cost trend rate assumptions, which have a significant effect on the expense and liability reported on the firm's financial statements. The authors report on their study to determine if the assumed trend rates have been reliable estimates of actual health care cost increases, and if the assumed trend rates have been consistent among corporations.