FASB on Wednesday approved an accounting revision requiring greater transparency of company financial obligations to multiemployer pension plans, but rejected a proposal calling for companies to disclosure their potential withdrawal liability in leaving such a plan, according to a statement from the FASB.
Under the revised Financial Accounting Standards Board standard, companies will have to disclose the most recent certified funded status of the multiemployer plan, as determined by its so-called “zone status” required by the Pension Protection Act of 2006, or whether the plan is less than 65% funded, between 65% and 80% funded or greater than 80% funded.
“Historically, very limited information about these plans has been disclosed, even though they may represent significant potential obligations for many large, unionized industries such as trucking, supermarket chains and construction firms,” Leslie F. Seidman, FASB chairman, said in the statement.
Companies had been required to disclose only their total contributions to all multiemployer plans in which they participate.
Under the revised standard, companies also will have to disclose:
• the amount of their contributions made to each “significant” multiemployer plan as well as to all plans in the aggregate (the board has not issued guidance on defining significant plan);
• whether their contributions represent more than 5% of total contributions to the multiemployer plan;
• which multiemployer plans, if any, are subject to a funding improvement plan; and
• expiration dates of collective bargaining agreements and any minimum funding arrangements.
The board also rejected a proposal for companies to provide an estimate of their obligations with respect to the underfunded status of individual multiemployer plans.
“Many of those who commented on the FASB’s proposal on multiemployer plans told the board that the withdrawal liability would not be an appropriate proxy for an employer’s proportional share of the underfunded status of the plan,” the statement said. “They suggested that the employer’s share of the underfunded status of the plan can only be determined through the collective bargaining process and they urged the FASB not to require a ‘point-in-time’ estimate of an employer’s obligations with respect to underfunding.”
FASB expects to vote in September on the final standard, which its staff will write based on the draft standard approved Wednesday. FASB plans to have the revision take effect on Dec. 16.