Accounting & Auditing

On September 21, 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-09, Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80):  Disclosures about an Employer’s Participation in a Multiemployer Plan. The update is intended to address a perceived lack of transparency regarding employer participation in multiemployer plans.

Summary

Prior to FASB’s update, an employer participating in one or more multiemployer plans would typically disclose only the total contributions made to the plans. The additional disclosures required by this update are intended to offer financial statement users useful information about the commitments an employer has made to multiemployer plans as well as the overall status of such plans.

New Disclosure Requirements

This update requires an employer to provide additional quantitative and qualitative disclosures about individually significant plans and about all plans in the aggregate. The significance of a plan to the employer should consider both the employer’s contribution and qualitative factors such as the severity of the underfunded status of the plan. Disclosures should include:

• The plan name, employer identification number and plan number (if available)
• 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
• 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
• The expiration date(s) of collective bargaining agreement(s)
• A description of the nature and effect of any changes affecting comparability for each period in which an income statement is presented

In addition, an employer is required to disclose the following as of the end of the most recent annual period presented:

• Whether a funding improvement plan or rehabilitation plan has been implemented or is pending
• Whether the employer paid a surcharge to the plan
• A description of any minimum contribution(s) required

When possible, the disclosures should be provided in a tabular format.

Withdrawal from a Multiemployer Pension Plan

The exposure draft issued in September 2010proposed requiring the estimated liability for withdrawal or windup of the plan to be disclosed, even if withdrawal or windup is not currently contemplated. FASB has omitted this proposed requirement for its final update. However, an employer still must consider whether a contingent liability under ASC Topic 450 should be recognized or disclosed if an obligation due to withdrawal is either probable or reasonably possible.

Effective Date

This update is applicable to nongovernmental entities participating in multiemployer plans and issuing financial statements prepared in accordance with U.S. GAAP.

For public entities, the revised disclosures are required for fiscal years ending after December 15, 2011. For nonpublic entities, the revised disclosures are required for fiscal years ending after December 15, 2012. The revised disclosures must be applied retroactively, and early adoption is permitted.

Contact your BKD advisor for more information on the new disclosure requirements.