Disclosure of an Employer’s Involvement in a Multiemployer Plan

September 22, 2011

After much anticipation, on Wednesday, September 21, 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-09.  This new guidance expands the current disclosure requirements for companies that participate in multiemployer plans.  This would include construction contractors that participate in multiemployer union pension plans.  Prior to this update, disclosure requirements were limited primarily to a company’s historical contributions made to the multiemployer plans.  This update intends to provide the users of the financial statements greater transparency into the financial health of the underlying multiemployer plans.

Under the main provisions of the new guidance, company’s participating in multiemployer plans will be required to expand the related disclosures to include the following:

  • Disclosure of those multiemployer plans in which the company significantly participates.  This will include the plan name, Employer Identification Number, and plan number of these plans to enable the reader to obtain additional financial information specific to these plans (such as the plan’s funded status).  However, for multiemployer plans that the financial statement user would not be able to obtain such additional financial information, the company is required to include additional disclosures as to:
    1. Description of the plan
    2. Qualitative description of what portion of the plan’s obligation for which the company may be liable
    3. Quantitative description of the plan’s most recent financial data
  • Disclosure of each plan’s most recently available Zone Status and the plan’s year-end to which the Zone Status applies.  The Zone Status identifies the funded status of a plan in one of three categories: 1) Less than 65% funded, 2) Between 65% and 80% funded, or 3) At least 80% funded.
  • Disclosure of the company’s level of participation in each of the multiemployer plans previously identified under the guidance at 1) above.  This will encompass not only the employer’s contributions made to each of the multiemployer plans during the reporting period  (as is currently required) but also whether these contributions represent greater than 5% of the total contributions made towards the plan during that same period.
  • Disclosure of the expiration dates of the collective bargaining agreements of the plans and whether the plans require minimum contributions or assess surcharges on the contributions.
  • Disclosure of any funding improvement plans or rehabilitation plans implemented or considered by the plans.

For non-public companies, this update becomes effective for years ending after December 15, 2012, however, early adoption is permitted.  For additional detail on this update, please visit fasb.org.

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