There are new disclosure requirements for employers that participate in a multi-employer defined benefit plan.
Employers generally contribute to multi-employer plans according to contractually negotiated rates and, historically, could become liable for “withdrawal liability” upon a cessation of contributions to an underfunded plan. Under the Pension Protection Act of 2006, contributing employers may also become liable for increased contributions under a “funding improvement” or “rehabilitation plan.”
Under previous FASB rules, an employer’s disclosure was limited to its historical contributions to the multi-employer plan in which it participates. FASB’s objective in issuing the update to the original pronouncement was to give financial statement readers a more accurate picture of an employer’s potential cash flow obligations, particularly concerning the possible withdrawal liability and funding improvement obligations arising in financially troubled plans.
The new requirements include the following:
- Identification of the significant multi-employer plans in which the employer participates by name and employer ID number.
- The level of participation in the significant plans, including an indication of whether the employer’s contributions represent more than 5 percent of total plan contributions.
- An indication of which plans, if any, are subject to a funding improvement plan.
- The expiration dates of any collective bargaining agreements and whether such agreements require minimum contributions.
- A qualitative description that helps investors understand the significance of the collective bargaining agreements, such as the portion of the employees covered.
- The financial health of the plan, including the most recent certified funded “zone” status of the plan. 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; or greater than 80 percent funded.
- A description of the nature and impact of any changes affecting comparability for each period in which a statement of income is presented.
to be continued …..
By: Tracie Youngless, CPA
