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New Multiemployer Pension Plan Disclosures Become Standard

Posted 12:00 PM by

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standard Updated No. 2011-09, “Compensation – Retirement Benefits – Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan. The new standard is intended to increase the disclosures of an employer’s participation in a multiemployer pension plan, specially the financial obligation that might arise from the participation in the plan. 

Prior to issuance, Generally Accepted Accounting Principles (GAAP) only required an employer to disclosure its total contributions to all multiemployer plans in which it participated.

The new standard issued by the FASB has not resulted in the recognition of any new assets or liabilities on the balance sheet. The new standard has increased the disclosure requirements for employers that participate in a multiemployer plan to include the following:

  • The plan name and identifying number for all significant multiemployer plans that the employer participates in
  • The total contributions that the employer has made to the plan and an indication of whether the employer’s contributions represent more than 5 percent of the total contributions to the plan by all contributing employers
  • An indication of the funded status of the plan as indicated in the plan’s certified “Zone Status”, as required by the Pension Protection Act of 2006. If a certified “Zone Status” is not available for the plan, then there must be a disclosure as to whether the plan is less than 65% funded, between 65% and 80% funded, or over 80% funded. 
  • If a funding improvement plan has been implemented or if a funding improvement plan is pending implementation
  • If the plan has imposed any surcharges on the contributions to the plan
  • The date when the collective bargaining agreement that requires the contributions to the multiemployer plan is set to expire 
  • If there is any minimum contribution requires from the collective bargaining agreement

For multiemployer plans in which a user of the financial statements of the employer are unable to obtain additional publicly available information on the multiemployer plan (i.e. a copy of the Form 5500) the following additional disclosures will be required:

  • A description of the nature of the plan benefits
  • A qualitative description of the extent to which the employer could be financial responsible for the obligations of the plan (could include benefits earned by an employee while working for a different employer)
  • To the extent available: total plan assets, actuarial present value of the accumulated plan benefits, and total contributions received by the plan.

The new statement will go into effect for nonpublic entities for annual periods for fiscal years ending after December 15, 2012, with early adoption permitted. Please note that standard requires the new disclosures to be applied retrospectively for all prior periods presented in the employers financial statements.

About the Author

Justin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group as well as being a member of the Not-for-Profit and Governmental Services Groups. Justin works with clients to help them avoid risk and maximize efficiencies by keeping an eye on their bottom line and helping ensure accurate financial reporting. Connect with him on LinkedIn.

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