New Disclosures Required for Entities that Participate in Multiemployer Pension PlansJune 21, 2012
In September 2010, the Financial Accounting Standards Board (FASB) issued an exposure draft of proposed Accounting Standards Update – Compensation – Retirement Benefits – Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan. One of the major provisions of this update was to require employers to disclose the amount of any potential liability that would be incurred if the employer were to withdraw from the multiemployer plan, even if such a withdrawal was not probable. The FASB received over 300 comment letters on this exposure draft and, as a result, they re-deliberated on this proposed update and released a revised update.
Under the revised update, the FASB decided not to require employers to disclose the withdrawal liability unless it is probable or reasonably possible that (1) the employer would withdraw from the plan and would incur a liability or (2) the employer’s contribution to the plan would be increased to make up for shortfall in the plan’s funding. The reason for this change was because, while a withdrawal liability is available upon request, it would be paid over time and can be limited based on legal constraints. Additionally, there could be other situations in which the liability could be negotiated or where employers could stop contributing to the plan without incurring a liability. While this particular disclosure was eliminated, there are now numerous new required disclosures.
These new disclosures assume that the Form 5500 for the plan is publicly available (for example on the U.S. Department of Labor’s Form 5500 database). If the Form 5500 is not publicly available, there are additional required disclosures. The new disclosures will be effective for years ending after December 15, 2011 for public entities and for years ending after December 15, 2012 for non-public entities. It is not yet clear how easily this information can be obtained, so companies that participate in multi-employer pension plans are encouraged to start obtaining the information needed to complete the below disclosures prior to the end their fiscal year.
The following are some of the disclosures that are required for employers that participate in multiemployer pension plans:
A narrative description of both the general nature of the multiemployer plans that provide pension benefits and of the employer’s participation in the plans that would indicate how the risks of participating in these plans are different from the single-employer plans.
When feasible, the following information is required to be presented in tabular format for each individually significant multiemployer plan that provides pension benefits:
- Legal name of plan
- The plan’s EIN and, if available, its plan number
- For each statement of financial position present, the most recently available certified zone status provided by the plan (as defined by the 2006 Pension Protection Act). The disclosure shall specify the date of the plan’s year-end to which the zone status relates and whether the plan has utilized any extended amortization provisions that affect the calculation of the zone status. Additional disclosures are required if this zone status is not available.
- The expiration date(s) of the collective bargaining agreements(s) requiring contributions to the plan, if any.
For each period that a statement of income is presented:
- The employer’s contributions made to the plan
- Whether the employer’s contributions represent more than 5% of total contributions to the plan
As of the most recent annual period presented:
- Whether a funding improvement plan or rehabilitation plan has been implemented
- Whether the employer paid a surcharge to the plan
A description of any minimum contribution(s), required for future periods by the collective bargaining agreement(s), statutory obligations or other contractual obligations, if applicable
An employer shall provide a description of the nature and effect of any significant changes that affect the comparability of employer contributions from period to period (i.e., a business combination, change in contractual contribution rate, change in number of employees covered, etc.)
Items 1 through 3 assume that the Form 5500 is publicly available. If the Form 5500 is not publicly available, the following additional disclosures are required:
- A description of the nature of the plan benefits
- A qualitative description of the extent to which the employer could be responsible for the obligations of the plan, including benefits earned by employees during employment with another employer.
Other qualitative information, to the extent available, as of the most recent date available, to help users understand the financial information about the plan, such as total plan assets, actuarial present value of accumulated benefits and total contributions received by the plan.
For each annual period for which a statement of income is presented, the following information shall be disclosed in tabular format:
- The company’s total contributions made to all plans that are not individually significant
- The company’s total contributions made to all plans