Increased transparency is the trend in the world of financial reporting, and this trend is clearly reflected in the new Accounting Standards Update (ASU) for companies that participate in multiemployer defined benefit pension plans. The Financial Accounting Standards Board (FASB) recently completed redeliberations on the standard that becomes effective for public companies later this year. The FASB’s September 2010 Exposure Draft on multiemployer defined benefit pension plans generated 330 comment letters. Among those who commented were participating employers, plan trustees and auditors, as well as high-profile industry association representatives. The FASB responded to the concerns of the commenters and eliminated the proposed requirement to disclose the employer’s multiemployer pension plan withdrawal liability in the final standard. A summary of the disclosures required by the final standard follows:
Key Provisions in the Final ASU 2011-09 (issued Sept. 21, 2011)
The final ASU requires the following disclosures for individually material plans in which an employer participates:
- Identifying plan information (e.g., plan name and EIN) such that stakeholders may access additional information from an individual plan’s public filing, including its financial statements.
- The funded status as most recently certified by the plan’s actuary, and any resultant funding rehabilitation plans.
- Expiration dates of related collective bargaining agreements.
- Minimum funding arrangements, if any.
- Whether the employer’s contributions represent more than 5 percent of the plan’s contributions.
- Individual contributions made to material plans, and the aggregate of all other contributions to plans considered to be immaterial for each annual period for which an income statement is presented.
- Description of the nature and effect of any changes that would impact the comparability of information for each period an income statement is presented.
Scope and Effective Dates
The disclosures required by the final ASU are effective for public entities that participate in multiemployer defined benefit pension plans for annual periods in fiscal years ending after Dec. 15, 2011. Non-public entities have an additional year to prepare and must comply with the expanded disclosures for annual periods for fiscal years ending after Dec. 15, 2012. Early adoption is permitted.
We recommend that calendar year-end public companies begin the information gathering process for their multiemployer defined benefit pension plan disclosures now by initiating information requests to plan administrators and actuaries. The key to successful implementation of the new standard is timely and open communication with all parties involved.
For more information on employers participating in multiemployer pension plans, please leave a comment below, or contact Dani Gisondo to learn more about employee benefit plan audits at 440-449-6800.
Information courtesy of BDO.