FASB Approves Changes to GAAP, Enhancing Disclosures of Participation in Multiemployer Defined Benefit Pension Plans

by Proskauer Rose LLP
Contact

The Financial Accounting Standards Board (the “FASB”) announced July 27, 2011 the approval of a revised accounting standard enhancing disclosures in financial statements regarding employers’ participation in multiemployer defined benefit plans. The rules are aimed at ensuring “that shareholders in companies that participate in these plans, workers who depend on them for their retirement benefits, as well as lenders and others, will have more information regarding the employers’ pension commitments and the financial health of the plans.” Although the new requirements are significantly less onerous than those originally proposed by the FASB in its September 2010 Exposure Draft, there are still important new disclosures of which contributing employers to such plans should be aware.

Background

As discussed in our earlier Client Alert on this subject [click here], the disclosures in financial statements under U.S. Generally Accepted Accounting Principles (known as “GAAP”) required of employers who contribute to multiemployer defined benefit pension plans are significantly more limited than the financial disclosures required to be made by employers maintaining single employer defined benefit plans or retiree health coverage. Prior to these new changes taking effect, absent some nonroutine event (e.g., withdrawal), an employer’s financial statement footnotes must only set forth the fact of participation and list the total contributions to all multiemployer defined benefit pension plans for the particular year. In addition, the balance sheet must only record liability for contributions earned but unpaid, and the income statement must only include contributions paid or accrued during the year.

New Standard

On July 27, 2011, the FASB issued a press release (click here) announcing that it approved a new standard enhancing these disclosure requirements.

Specifically, an employer will now be required to disclose in financial statement footnotes the following information regarding its participation in multiemployer defined benefit pension plans:

  • Amount of employer contributions made to each “significant” plan and to all plans in the aggregate.

  • Whether the employer’s contributions represent more than five percent of total contributions to the plan.

  • Which plans, if any, are subject to a funding improvement plan.

  • The expiration date(s) of collective bargaining agreement(s) and any minimum funding arrangements.

  • The most recent certified funded (i.e., “zone”) status of the plan under the Pension Protection Act of 2006 (or, if not available, whether the plan is less than 65% funded, between 65% and 80% funded, or greater than 80% funded).

  • A description of the nature and effect of any changes affecting comparability for each period in which a statement of income is presented.

As expected, in light of hundreds of comments it received on its original Exposure Draft, the FASB decided not to require (as originally proposed) disclosure of withdrawal liability or some other proxy for an employer’s share of a multiemployer defined benefit pension plan’s underfunding. Notably, it appears that the enhanced disclosures will not apply with respect to retiree health benefits provided under multiemployer plans.

Effective Dates

Public entities must comply with the enhanced disclosure rules for fiscal years  ending  after December 15, 2011 (meaning that public entities on the calendar year will need to disclose in the 2011 financial statements). In contrast, nonpublic entities will not be required to include the new disclosures until fiscal years ending after December 15, 2012.

Next Steps

The new standard is expected to be finalized in September 2011. Once finalized, employers contributing to these plans will want to become familiar with the new requirements, gather data as it becomes available and prepare to enhance their reporting.

*                      *                      *

Please contact your employee benefits attorney at Proskauer if you would like more detailed guidance on this subject.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Proskauer Rose LLP | Attorney Advertising

Written by:

Proskauer Rose LLP
Contact
more
less

Proskauer Rose LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.