The Financial Accounting Standards Board recently issued Accounting Standards Update (ASU) 2017-06, Plan Accounting—Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (A Consensus of the Emerging Issues Task Force) which is aimed at reducing the complexity and redundancy of the disclosures currently required for employee benefit plans with investments in master trusts. The issuance of ASU 2017-16 is the AICPA’s latest step in improving the usefulness of the employee benefit plan financial statements.
Current guidance requires the following to be disclosed for master trusts: general type of investment; the net change in the fair value of investments of the master trust; the total investment income of the master trust by type; a description of the basis used to allocate net assets, net investment income or loss, and gains or losses to participating plans; and the plan’s percentage interest in the master trust.
The following is a summary of the significant disclosures as required by this ASU:
A plan's interest in a master trust and change in interest in the master trust should be presented in separate line items in the plan's statement of net assets available for benefits and the statement of changes in net assets available for benefits, respectively.
The dollar amount of the plan's interest in each general type of investment held by the master trust should be disclosed (and removal of the requirement to disclose the percentage interest in plans with divided interests), which would supplement the existing GAAP requirement that a plan disclose the master trust's balances in each of those investments by general type.
The plan should disclose the master trust's other asset and liability balances (i.e., amounts due from brokers for securities sold, amounts due to brokers for securities purchased, accrued interest and dividends, and accrued expenses), as well as the dollar amount of the plan's interest in each of those balances.
Remove requirement to provide investment disclosures relating to the 401(h) account assets; however, the amendments will require the health and welfare benefit plan to disclose the name of the defined benefit pension plan in which those investment disclosures are provided so that participants can easily access those statements for information about the 401(h) account assets, if needed.
The amendments are effective for all plan years beginning after December 15, 2018. Earlier adoption is permitted. The amendments in the ASU should be applied retrospectively to all periods presented in a reporting entity's fiscal year of adoption.