FASB Expands Employer Disclosures for Multiemployer Pension Plans

FASB last week completed redeliberations on a revised accounting standard it said will provide more information about an employer’s financial obligations to multiemployer pension plans. Previously, employers were required to disclose only their total contributions to all multiemployer plans in which they participate.

FASB said it expects that the final Accounting Standards Update will be prepared and published in September. The revisions are based on a proposal the board issued in September 2010. But the board, responding to commenters’ concerns, will delete from the final standard a requirement that employers disclose their withdrawal liability to all plans in which they participate. FASB posted an action alert and a FASB in Focus analysis to summarize the main elements of the disclosures.


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.

“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,” said FASB Chairman Leslie Seidman in a press release.

The AICPA’s Private Companies Practice Section (PCPS) Technical Issues Committee (TIC) submitted
comments on the proposal in November. TIC said it supported the proposal as a necessary step to improve disclosure of an employer’s involvement in a multiemployer plan. However, TIC had concluded that the ED included certain required disclosures that would be unnecessary for public and private employers and that may have cost implications for the plans that would need to supply many of the proposed disclosures to participating employers.


Among disclosures that TIC had recommended against requiring and that were deleted from the final rule include: (1) whether the employer is or is not represented on the board of trustees of the plan(s) or a similar body; and (2) expected contributions for the next annual period. TIC is pleased that many of the proposed disclosures that it cited as unnecessary were eliminated from the final standard.


The final rule also would allow employers to omit reporting certain quantitative information to the extent it is not available without undue cost. The employer would be required to describe what information it omitted and why.


FASB decided to delete from its original proposal the requirement that employers disclose their withdrawal liability to all plans in which they participate, or provide a “point-in-time” estimate of its obligations with respect to the underfunded status of individual plans. FASB said many commenters told the board that the withdrawal liability would not be an appropriate proxy for an employer’s proportional share of the underfunded status of the plan. They suggested that the employer’s share of the underfunded status of the plan can only be determined through the collective bargaining process, and they urged FASB not to require a “point-in-time” estimate of an employer’s obligations with respect to underfunding.

Essential elements of the disclosures required for individually material plans include:


  • An indication of whether the employer’s contributions represent more than 5% of total contributions to the plan. 
  • An indication of which plans, if any, are subject to a funding improvement plan. 
  • The expiration date(s) of collective bargaining agreement(s) and any minimum funding arrangements. 
  • 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% funded 
    • Between 65% and 80% funded 
    • Greater than 80% funded.


In addition, required disclosures for all plans include:


  • The amount of employer contributions made to each individually material plan and to all plans in the aggregate. 
  • A description of the nature and effect of any changes affecting comparability for each period in which a statement of income is presented.


For public entities, the enhanced disclosures will be required in fiscal years ending after Dec. 15, 2011. For nonpublic entities, the enhanced disclosures will be required in fiscal years ending after Dec. 15, 2012.


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