US - General Motors (GM) and the Securities and Exchange Commission (SEC) have settled a dispute over discount rates used to calculate projected returns for the GM pension fund.
The SEC alleged GM "violated the issuer reporting, books-and-records, and internal controls provisions of the federal securities laws".
According to the SEC, GM said it used a duration matched approach to select its discount rate, but failed to disclose the 6.75% discount rate used in 2002 was developed using a non-duration matched approach.
The non-matched rate was "materially higher" than the rate would have been if a matched approach was used. The complaint also said the company had used a projected rate of return which had never been higher than its most recent 10 year average return "since at least the mid-1980s".
The SEC said by using a 10 year rate of return consistent with its historical average, 2003 pre-tax earnings would have been $680m lower.
The SEC complaint also alleged GM did not disclose cash contributions to its pension schemes in order to avoid variable rate premiums to the Pension Benefit Guaranty Corp (PBGC).
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