New multi-employer plan disclosures
By Harvey M. Katz
the Financial accounting Standards Board recently approved a
revised accounting standard that requires contributing non-gov-ernmental employers to provide more information about their
financial obligations to multi-employer pension plans.
New FASB ASU gives clearer picture of cash flow obligations
It should be noted that the amendments
in Accounting Standards Update No. 2011-
09 only apply to multi-employer plans that
are defined-benefit plans covering the union
employees for more than one employer. De-fined-contribution plans, single-employer
and non-union plans are not covered.
Employers generally contribute to multi-
employer plans according to contractually
negotiated rates and, historically, could be-
come liable for “withdrawal liability” upon
a cessation of contributions to an under-
funded plan. Under the Pension Protection
Act of 2006, contributing employers may also
become liable for increased contributions
under a “funding improvement” or “reha-
Under previous FASB rules, an employer’s
disclosure was limited to its historical contri-
butions to the multi-employer plan in which
it participates. FASB’s objective in issuing the
update was to give financial statement read-
ers 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.
FASB’s initial draft of the guidance included a requirement to include a point-in-time
estimate of an employer’s withdrawal liability
during the period of the financial statement.
However, in public hearings, many negative
comments surfaced regarding that proposal. Many of those who commented told the
board that the withdrawal liability would not
be an appropriate proxy for an employer’s
withdrawal liability or contribution obligations to the plan. Commentators also pointed
out that such point-in-time estimates are difficult and time-consuming to obtain, almost
Harvey M. Katz is a partner at Fox Roths
child LLP in the law firm’s New York office.
Reach him at (212) 8787976 or hkatz@
always requiring cooperation from the plan.
In the final version, FASB substituted a
more meaningful set of requirements, requir-
ing disclosure of the following:
Identification of the significant multi-em-
ployer plans in which the employer partici-
pates 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
It is anticipated that the financial state-
ments about the plans will be accessible
from publicly available Forms 5500. The fol-
lowing additional disclosure regarding plan
benefits and employer financial obligations
is required for plans where such information
is not available:
A description of the nature of the plan
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; and,
Other quantitative information, to the
extent available, and as of the most recent
date available, to help users understand the
financial information about the plan, such as
the total plan assets, actuarial present value
of the accumulated plan benefits, and the to-
tal contributions received by the plan.
AICPA SETTLES COPYRIGHT SUIT
The American Institute of CPAs settled its
copyright infringement lawsuit with KAPLI
Inc., a provider of review course materials, over the company’s alleged use of
some of the questions and test items
from the AICPA’s Uniform CPA Exam that
had not previously been made public.
Under the deal, KAPLI, which is short
for Korean American Professional Learning Institute, has agreed to a confidential
As part of the settlement, the parties
have entered into a license agreement
under which the AICPA will release to
KAPLI certain CPA Exam content and test
materials for use in its review courses.
“We are committed to ... ensuring the
CPA Exam is conducted in a fair and level
testing environment,” said AICPA vice
president of examinations Craig Mills.
“We are pleased that this review course
provider has agreed to cooperate in our
ongoing investigation of candidates who
may have violated their confidentiality commitment by improperly sharing
questions and test items.” The AICPA
said that it would provide any actionable
information to the relevant state boards
of accountancy, along with possible
recommendations to cancel scores and
revoke eligibility to sit for the exam.
IASB, IFAC TO COOPERATE MORE
NEW YORK — The International Accounting
Standards Board and the International
Federation of Accountants agreed last
month to strengthen their cooperation
on developing accounting standards for
both the private and public sectors.
While the IASB is responsible for
developing International Financial
Reporting Standards, IFAC supports the
International Public Sector Accounting
Standards Board, which is responsible for
developing International Public Sector
Accounting Standards. IPSAS are used by
an increasing number of public authorities and governments around the world.
The new agreement represents a
commitment to strengthen the cooperation between the two boards to ensure
greater consistency in their standard-setting activities. Many of IFAC’s public sector standards are drawn from IFRS.