FASB Updates Accounting Standards on Employer’s Participation in a Multiemployer Plan
The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update on Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan.
Accounting Standards Update No. 2011-09 is intended to lead employers to provide more information about an employer’s financial obligations to multiemployer pension plans.
Last July, FASB approved the revised accounting standard.
Multiemployer pension plans commonly are used by an employer to provide benefits to union employees who may work for many employers during their working life, thereby enabling them to accrue benefits in a single pension plan for their retirement.
FASB Chairman Leslie Seidman then said: “Historically, very limited information about these plans has been disclosed, even though they may represent significant potential obligations for many large, unionized industries such as trucking, supermarket chains, and construction firms.
“The enhanced disclosures will ensure that shareholders in companies that participate in these plans, workers who depend on them for their retirement benefits, as well as lenders and others, will have more information regarding the employers’ pension commitments and the financial health of the plans.”
As announced in July, the new disclosures include the amount of employer contributions made to each significant plan and to all plans in the aggregate; an indication of whether the employer’s contributions represent more than five percent of total contributions to the plan; an indication of which plans, if any, are subject to a funding improvement plan; and the expiration date(s) of the collective bargaining agreement(s) and any minimum funding arrangements.
The disclosures also contain the most recent certified funded status of the plan, as determined by the plan’s so-called “zone status,” which is required by the Pension Protection Act of 2006.
If the “zone status” is not available, an employer will be required to disclose whether the plan is less than 65 percent funded; between 65 percent and 80 percent funded; at least 80 percent funded; and a description of the nature and effect of any changes affecting comparability for each period in which a statement of income is presented.
Prior to the issuance of this update, employers were required to disclose only their total contributions to all multiemployer plans in which they participate.
For public entities, the enhanced disclosures will be required for fiscal years ending after December 15, 2011. For nonpublic entities, the enhanced disclosures will be required for fiscal years ending after December 15, 2012. Early application will be permitted.
The September 2011 FASB in Focus provides an overview of the main provisions in the Update.