Coping with FAS 106 liability - Employer cap

[Guest Noelle]

I know that many employers providing retiree health coverage are imposing caps on employer contributions in order to limit FAS 106 liability. Are there any special requirements for imposing such a cap? How does the cap become "official" such that an accountant may properly determine that it really exists and calculate FAS 106 liability accordingly. Does it need to go in the SPD? A Board action imposing the cap? A memo to the file? Practical implementation suggestions are much appreciated. Thanks.

[Ron Snyder]

Are there any special requirements for imposing such a cap?

Yes

How does the cap become "official" such that an accountant may properly determine that it really exists and calculate FAS 106 liability accordingly.

By being formally adopted by the sponsor in written form, either as a part of the plan or as an amendment to the plan.

Does it need to go in the SPD?

Yes

A Board action imposing the cap?

Yes, unless there is a delegation of powers to corporate officers.