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Disclosure Requirements for Multi-employer Pension Plans

By: Mark Rodruck, CPA, Partneremail

On September 1, 2010, the Financial Accounting Standards Board (FASB) issued an Exposure Draft of a proposed Accounting Standards Update. The proposed update is intended to increase transparency in financial reporting for organizations that participate in multi-employer pension and other postretirement benefit plans. The update suggests new disclosures that the Board believes would help users of financial statements better assess the potential risks faced by those organizations.

Current U.S. GAAP requires employers to disclose their total contribution to multi-employer plans, but there is no requirement to describe the funding status of these plans. The objective of the project is to enhance the disclosures of an employer’s participation in a multi-employer pension plan. The Exposure Draft proposes the following disclosures, among others:

  • Total assets and accumulated benefit obligation of the plan
  • Quantitative information about the employer’s participation in the plan, for example, the number of its employees as a percentage of total plan participants
  • A description of the contractual arrangements between the employer and the plan, including the length of the arrangement, the contribution rates agreed to, and any minimum funding arrangements
  • Expected contributions for the next period and known trends in future contributions
  • The amount required to be paid upon withdrawal from the plan
  • A narrative description of any funding improvement plans adopted by the plan, including the expected effects on the employer.

This change was proposed to be effective for fiscal years ending after December 15, 2010 for public companies. A private company would be required to provide the enhanced disclosures for fiscal years beginning on or after December 15, 2010 (one year later than public companies). However, at its November 10, 2010 meeting, the Board decided that it will not be effective for the 2010 calendar year-end reporting period and it will decide on an effective date at a future meeting after it has substantially concluded its redeliberations. FASB will use the additional time to analyze and digest the more than 320 comments it received on the Exposure Draft, and to decide how to modify its Exposure Draft, if at all. The Board’s technical plan calls for the standard to be issued in the second quarter of 2011.