Withdrawal Liability - Financial Statements

[luissaha]

Should a plan be recording an estimated receivable on its financial statements for withdrawal liability assessed in the plan year? I'm not sure how this would work. Plans assess withdrawal liability during the plan year, but often times it is uncollectible because of employer bankruptcies, closings, etc. Does anyone have any insight on this?

[Jim Dexter]

From what I've seen, auditors differ in the way they handle such amounts. Many auditors include the value of expected withdrawal liability payments in the financial statements (presumably reduced for payments that are expected to be uncollectable). Others don't count any such payments until received by the plan. But note that regardless of what the auditor does, for minimum funding purposes withdrawal liability payments shouldn't be counted until they're actually received by the plan (see Internal Revenue Code § 431(b)(7)(A)). For withdrawal liability purposes, the treatment of receivables depends on the withdrawal liability method being used. For Rolling-5, for example, the unfunded vested benefits are reduced by the amount of outstanding claims for withdrawal liability which can reasonably be expected to be collected. On the other hand, under the presumptive method, withdrawal liability payments aren't taken into account until actually received by the plan.

[luissaha]

Thanks for the response.