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CCH® PENSION — 8/12/11

FASB Finalizes Changes To Disclosures By Employers Contributing To Multiemployer Plans

from Spencer’s Benefits Reports: The Financial Accounting Standards Board (FASB) has finalized the disclosure requirements for employers contributing to a multiemployer pension plan. The Accounting Standards Update, Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80): Disclosure about an Employer’s Participation in a Multiemployer Plan, was approved at the July 27 FASB meeting. The FASB announced that the final language will be approved in September.

The effective date for public entities will be for annual periods ending after Dec. 15, 2011. The effective date for nonpublic entities will be deferred for one year, to annual periods ending after Dec. 15, 2012.

The changes in multiemployer pension plan disclosure requirements began with the release of a proposal in September 2010. Many of the requirements finalized, and listed below, were agreed to at a May 31, 2011, FASB meeting.

Disclosure Requirements

The disclosure requirements for employers contributing to a multiemployer pension plan include the following:

(1) For each multiemployer plan for which contributions are individually material in relation to the employer’s participation in such plans, the employer must disclose the following information:

  • The expiration date of the plan’s associated collective bargaining arrangement, if any. For plans with multiple collective-bargaining agreements, disclosure of the range of the expiration dates of those agreements, supplemented with qualitative disclosure identifying the significant collective-bargaining agreements within that range.
  • Whether the employer’s contributions represent more than 5% of total contributions to the plan.
  • A disclosure of any minimum contributions to the plan required by the agreement, if applicable.

    (2) For each annual period for which an income statement is presented, the employer must disclose the total contributions made to all multiemployer plans, to each individually material plan, and to all other plans in the aggregate.

    (3) As part of the disclosure, the employer must give a description of the nature and effect of any changes that would affect comparability for each period presented in the statement of income. This disclosure will include any business combination or divestiture that took place, any change in the rate of employer contributions, and any change in the number of employees covered by multiemployer pension plans.

    (4) When a plan in which the employer is individually material does not have plan level information that is publically available comparable to the plan level information included in the Form 5500, the employer must disclose the following:

    • The employer’s contribution to the plan.
    • Information about the plan, including: (i) a description of the nature of the plan benefits; (ii) the extent to which the employer could be responsible for the underfunded status of the plan; (iii) the certified zone status (or whether the plan is less than 65% funded; between 65% and 80% funded; or greater than 80% funded); (iv) whether the employer’s contributions represent more than 5% of total contributions to the plan; and (v) other quantitative information that the employer believes would help users to understand the financial information about the plan, such as plan assets, plan liabilities, and total contributions to the plan.
    • When the quantitative information in (iii), (iv), and (v) above, is not available without undue cost, it can be omitted as long as there is an explanation of the information and why it was omitted. In that circumstance, the employer must disclose any available qualitative information that it believes would help users to understand the financial information about the plan.

    This information should be included in a separate section in the tabular disclosure so that users can understand the different kinds of plans involved. The FASB expects that these types of plans will be primarily foreign plans.

    (5) An employer must provide a narrative disclosure of the general nature of the plans and the employer’s participation in the plans that would indicate how the multiemployer pension plans are different from single employer plans.

    Two Items Not Adopted

    The FASB decided not to require employers to disclose the consequences it may face if it ceases contributing to the plan (i.e., its potential withdrawal liability). The employer also does not have to disclose whether it is represented on the board of trustees of the plan(s).

    The completion of the Multiemployer Pension Plan Disclosure Project was described in the FASB In Focus newsletter at http://www.fasb.org. In part, the newsletter noted the following:

    “In developing the new requirements, the FASB’s goal was to help users of financial statements assess the potential future cash flow implications relating to an employer’s participation in multiemployer pension plans. The disclosures also will signal the financial health of all of the significant plans in which the employer participates and reference additional information that is available outside of the financial statements.”

    For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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