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Get Ready for FASB’s New Multi-Employer Pension Plan Disclosure Requirements

September 26, 2011
By Salvatore Armao

In July the Financial Accounting Standards Board (FASB) approved a revised accounting standard for employers that contribute to multi-employer pension plans. Employers previously were required to disclose only their total contributions to the multi-employer plans in which they participated. The new standard requires them to provide much more information about their financial obligations to the plans.

The enhanced disclosures will be required in fiscal years ending after December 15, 2011 for public entities and after December 15, 2012 for non-public entities. Much of the additional information employers will need must be provided by the plans. Consequently, plan administrators and boards of trustees need to understand the new standard and should start planning to compile the necessary information for it now. Consider taking these steps to prepare for the additional reporting requirements.

Step 1: Become familiar with the disclosure requirements.

Employers must provide the following new disclosures in their financial statements:

  • 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.
  • 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 percent funded
  • Between 65 percent and 80 percent funded
  • Greater than 80 percent funded

Additional details are available from the FASB website:

Step 2: Prepare now to obtain the necessary information contributing employers will need.

Providing the information required for the new disclosures may involve modifying or updating your plan’s record-keeping systems and reports.

Step 3: Make provisions to obtain required information from outside third parties.

This may require you to work with the actuaries, accountants, attorneys and investment advisers that service your plan.

You can stay informed about this topic or any new requirements that the Financial Accounting Standards Board may issue in the future by visiting their website at www.fasb.org.

September 25, 2011

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