As RubinBrown has previously reported, the Financial Accounting Standards Board (FASB) has been considering requiring additional disclosures for multi-employer pension plans for the past several years.
On July 27th, 2011, FASB approved requiring additional disclosures for these plans. Most importantly for the construction industry, the estimated withdrawal liability is not one of the required disclosures.
The additional disclosures are generally consistent with what RubinBrown reported back in June 2011 (click here to view) and largely reflect a compromise disclosure standard proposed by the Construction Industry FASB Coalition (CIFC).
A point of emphasis for CIFC was that the estimated withdrawal liability not be a part of the required additional disclosures.
The following additional disclosures are required for individually material plans:
- As of the date of each annual balance sheet presented, the most recent certified zone status, as required by the Pension Protection Act of 2006, if available.
- If zone status is not available, an employer should disclose whether the plan was:
- Less than 65 percent funded;
- Between 65 percent and 80 percent funded; or
- Greater than 80 percent funded
- An indication of whether the employer’s contributions represent 5 percent or more of the total contributions to the plan.
- For individual material plans that do not have plan level information that is publicly available comparable to the plan level information included in a U.S. Form 5500, and employer would provide:
- The employer’s contribution to the plan
- Information about the plan, including:
- A description of the nature of the plan benefits
- The extent to which the employer could be responsible for the underfunded status of the plan
- The information required by 1(a) and 1(b) above
- 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.
- To the extent that quantitative information in 2(b)(iii) and 2(b)(iv) is not available without undue cost, that quantitative information may be omitted and the employer would describe what information has been omitted and why. In that circumstance, the employer also would be required to provide any available qualitative information that it believes would help users to understand the financial information about the plan.
- The Board decided to require the following:
- A narrative disclosure of the general nature of the plans and the employer’s participation in the plans that would indicate how the multi-employer pension plans are different from single employer plans.
- A disclosure of any minimum contributions to the plan required by agreement, if applicable
- A disaggregation of information only for individually material plans
- For plans with multiple collective-bargaining agreements, disclosure of the range of expiration dates of those agreements, supplemented with a qualitative disclosure identifying the significant collective-bargaining agreements within that range.
- The Board decided not to require the following proposed disclosures:
- The consequences the employer may face if it ceases contributing to the plan
- Whether the employer is represented on the board of trustees of the plan(s).
- The Board decided to require the disclosures to be adopted retrospectively. The effective date for public entities will be for annual periods ending after December 15, 2011. The effective date for nonpublic entities will be deferred for one year and will be effective for annual periods ending after December 15, 2012. Early adoption will be permitted.
FASB stated that it expects these changes to be finalized by September 2011. RubinBrown will continue to update you on further developments as they arise.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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