As we reported back in September 2010, the Financial Accounting Standards Board (FASB) issued Exposure Draft 715-80 on September 1, 2010 titled “Disclosure About An Employer’s Participation In A Multi-Employer Plan”. This Exposure Draft proposed significant new disclosure requirements for Contractors participating in these multi-employer plans.
FASB received 328 comment letters on the Exposure Draft. Upon review of the comment letters, it appears that FASB is reconsidering several of the proposed disclosures in the Exposure Draft. At a May 31, 2011 meeting, FASB tentatively adopted a compromise disclosure standard proposed by the Construction Industry FASB Coalition (CIFC).
The primary concern of CIFC regarding the Exposure Draft was its requirement that Contractors disclose an estimate of withdrawal liability. At the May 31 meeting, FASB members held a lengthy discussion of possible alternatives to such a disclosure identified by FASB staff. By a thin margin, FASB tentatively adopted the CIFC supported alternative and the following principles regarding quantitative disclosures:
1. An employer would not be required to disclose the estimated withdrawal liability as proposed. Instead, an employer would disclose the following for each multi-employer plan for which contributions are individually material in relation to the employer’s participation in such plans:
- Legal name of the plan
- Employer Identification Number of the plan
- 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.
- Whether a funding improvement plan or rehabilitation plan had been implemented or was pending
- For each annual period that an income statement is presented, contributions made to the plan
- Whether the entity paid a surcharge to the plan
- The expiration date of the plan’s associated collective-bargaining arrangement, if any
- Whether the employer’s contributions represent more than 5 percent of total contributions to the plan.
2. For each annual period for which an income statement is presented, an employer would disclose the total contributions made to all multi-employer plans and:
- The contributions made to each individually material plan (see item 1 above)
- The total contributions made to all other plans in the aggregate.
3. An entity would not be required to provide the following disclosures proposed in the Exposure Draft:
- The number of multi-employer plans in which the employer participates
- The total assets and the accumulated benefit obligation of multi-employer plans
- The contributions to a plan as a percentage of total contributions
- The percentage of employer’s employees that are covered by multi-employer plans
- Supplemental information about the plans in which the information about the withdrawal liability is not available.
FASB directed staff to conduct outreach with users about these tentative decisions and to conduct an analysis of qualitative disclosures. FASB also tabled, awaiting a more detailed staff recommendation, a discussion of possible additional disclosures regarding (1) an estimate of the employer’s proportionate share of a plan’s under funding and (2) aggregated plan data and an estimate of the employer’s relative participation in the plan (e.g., the company’s percentage of overall contributions). All of these issues are expected to be discussed at FASB’s next meeting.
The exact timing of FASB’s issuance of a final standard, and whether FASB will first issue another exposure draft for comment before issuing a final standard is unknown at this time. However, indications are that FASB staff will recommend publishing a final standard without another formal comment period.
We will continue to update you on new developments as they arise.
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