Industry Insights

After considering more than 300 comment letters and conducting extensive deliberations in response to its September 2010 exposure draft, the Financial Accounting Standards Board (FASB) has approved disclosure changes for multiemployer pension plans.

The new disclosures are designed to provide more useful information about an employer’s commitments to multiemployer pension plans and the overall status of such plans. Prior to FASB’s approved changes, an employer’s financial statement disclosures typically were limited to total contributions to all multiemployer plans in which the employer participated.

Respondents to comment letters generally agreed additional disclosures may be appropriate, but their letters identified several concerns. A primary concern was the initial proposal to require disclosure of estimated liabilities for withdrawal from or windup of the plan, even if withdrawal or windup is not currently contemplated. FASB has omitted this proposed requirement.

Also of significance, FASB decided not to require disclosure of:

• The employer’s potential consequences for ceasing contribution to the plan
• Indication of whether the employer is represented on the plans’ board(s) of trustees

New Required Disclosures

FASB approved the following disclosures:

• Employer contribution amounts to each significant plan and to all plans in the aggregate
• An indication of whether the employer’s contributions represent more than 5 percent of total plan contributions
• Which, if any, plans 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 status of the plan, as determined by the plan’s “zone status,” required by the Pension Protection Act of 2006; if the zone status is not available, an employer will be required to disclose whether the plan is:
• Less than 65 percent funded
• Between 65 percent and 80 percent funded
• Greater than 80 percent funded
• A description of the nature and effect of any changes affecting comparability for each period in which an income statement is presented

Effective Date & Transition

FASB anticipates the approved changes will be finalized in September 2011. The revised disclosures will be required to be adopted retroactively—disclosures will be required in fiscal years ending after December 15, 2011, for public entities and in fiscal years ending after December 15, 2012, for nonpublic entities. Early adoption will be permitted.

Contact your BKD advisor to further discuss effects of the new disclosure requirements.