In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2011-09, Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan. The FASB issued this update to address concerns from various financial statement users on the lack of transparency about an employer’s participation in a multiemployer pension plan. One of the items of concern that drove the new guidance is the possibility that, if a participating employer fails to make its required contributions, the unfunded obligations of the plan could be the responsibility of the remaining participating employers.
Previously, disclosures were primarily limited to the historical contributions made to the plans by the employer. Going forward, the new disclosures will enable financial statement users to assess the potential future cash flow implications relating to an employer’s participation in a multiemployer plan. This disclosure will also indicate the financial health of all significant plans in which the employer participates. The amendments in this update will apply to nongovernmental entities.
The main provisions in this update require that employers participating in multiemployer plans provide the following enhanced disclosures:
- The significant multiemployer plans in which an employer participates, including the plan names and identifying number.
- The level of an employer’s participation in the significant multiemployer plans, including the employer’s contributions made to the plans and an indication of whether the employer’s contributions represent more than 5% of the total contributions made to the plan by all contributing employers.
- The financial health of the significant multiemployer plans, including an indication of the funded status, and whether the plan has imposed surcharges on the contributions to the plan.
- The nature of the employer commitments to the plan, including when the collective-bargaining agreements that require contributions to the plans are set to expire and whether those agreements require minimum contributions to be made to the plans.
For plans for which users are unable to obtain additional publicly available information outside of the employer’s financial statements, this update requires the employer to make additional disclosures about the plan, including the following:
- A description of the nature of the plan benefits.
- A qualitative description of the extent to which the employer could be responsible for the obligations of the plan, including benefits earned by employees during employment with another employer.
- Other quantitative information, to the extent available, as of the most recent date available, to help users understand the financial information about the plan, such as total plan assets, actuarial present value of accumulated plan benefits, and total contributions received by the plan.
The new disclosures required by this update are effective for fiscal years ending after December 15, 2012, which means that it will be required for December 31, 2012 financial statements.
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