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News Items, by Subject

Accounting for benefits, incl. FASB, GASB

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FASB Changes for Employee Benefit Plans with Master Trust Investments
"FASB issued Accounting Standards Update 2017-06 to provide additional guidance on disclosure of an employee benefit plan's interest in a master trust. The changes are aimed particularly at defined contribution plans, which generally have divided interests (rather than percentage interests) in master trusts. The guidance is effective for fiscal years beginning after December 15, 2018, and applies retrospectively to each period for which financial statements are presented." (McDermott Will & Emery)
[Official Guidance] GASB Issues Implementation Guide on Fiduciary Activities
"[GASB] has issued a new Implementation Guide that contains questions and answers about the GASB's recently issued standards on accounting and financial reporting for fiduciary activities. Implementation Guide No. 2019-2, Fiduciary Activities, answers many questions about how to apply the provisions of GASB Statement No. 84, Fiduciary Activities." (Governmental Accounting Standards Board [GASB])
Financial Reporting for Tribal 401(k) Plans
"GASB No. 84 doesn't apply to a tribe's separately issued enterprise-fund financial statements if the enterprise funds aren't legally separate. However, a 401k plan may still be included in a tribal government's statements ... To determine if a legally separate casino sponsors its own 401k plan, consider if the casino can amend the vesting schedules in the plan document, appoint trustees, select the custodian, choose the third-party administrator (TPA), and appoint other service providers of the 401k plan. If so, the 401k plan will likely be included as a fiduciary activity." (Moss Adams LLP)
What is the Effect of Prohibited Transactions on the EBP Audit Opinion?
"If a prohibited transaction with a party in interest is not properly reported, the auditor will modify the auditor's opinion on the ERISA-required supplemental schedule if the effect of the transaction is material to the plan's financial statements. Conversely, if the effect of the prohibited transaction is not material to the financial statements, the auditor will include an additional discussion describing the prohibited transaction in an "Other Matters" paragraph in the auditor's report on the ERISA-required supplemental schedules." (Belfint Lyons Shuman)
The Importance of Retaining and Protecting Employee Benefit Plan Records (PDF)
32 pages. "This advisory describes ERISA and DOL record retention requirements, protecting personally identifiable information, the effect of inadequate records on audit scope and testing and the auditor's report, and the implications to the plan administrator for failure to properly retain records. The advisory also provides suggestions for best practices for record retention and data protection and additional resources." (American Institute of Certified Public Accountants [AICPA])
FASB Amends Master Trust Reporting Requirements for Employee Benefit Plans
"This guidance will reduce diversity in disclosures relating to master trust interests in employee benefit plan financial statements and provide the users of these financial statements with more information, especially when a plan has a specific (divided) rather than proportionate (undivided) interest in a master trust." (EisnerAmper)
What ERISA Practitioners Need to Know About Accounting for Benefit Plans (PDF)
38 presentation slides, from ABA EBC 2019 Midwinter Meeting. Topics include: [1] Practice tips. [2] What does a Balance Sheet/ statement of Net Assets look like? [3] What does the Income Statement/Statement of Changes in Net Assets Available for Benefits look like? [4] What does a DB plan's Actuarial Information look like? [5] What does a health plan's Benefit Obligations look like? [6] Uses of financial statements in ERISA practice and litigation. [7] Statutory basis for audit requirement. [8] Questions DOL identified that a fiduciary should ask the plan auditor. [9] Investment valuation: what's required. [10] Investment valuation: issues for fiduciaries. [11] Investment valuation: what should trustees/investment committees do periodically? (Employee Benefits Committee [EBC], American Bar Association)
[Guidance Overview] Final Balloted Draft of Employee Benefit Plan Audit Standards Released by Auditing Standards Board
"[T]he Final Balloted Draft standard shouldn't affect the nature and extent of audit procedures performed by compliant auditors. However, the standard formally memorializes the objectives of the audits and the responsibilities of the auditor and management, to provide a clear framework of accountability for all parties involved." (Belfint Lyons Shuman)
A Curious Lace in the Other Shoe About to Drop on State Balance Sheets
"Looking across the 50 states, and using the state governments' own actuarial and accounting assumptions, total unfunded retiree health care obligations run about 80% as high as total unfunded pension obligations. Retiree health care debt actually runs higher than pension debt in 12 of the 50 states.... What characterizes the top ten ('Stronger Credit Rating') states, compared to the bottom ten ('Stronger Taxpayer Burden') states? ... The states with 'Stronger Credit Ratings' have very high OPEB (retiree health care) debt per taxpayer, compared to the 'Stronger Taxpayer Burden' states." (Truth in Accounting)
[Official Guidance] Text of AICPA Statement on Auditing Standards: Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (PDF)
Final Balloted Draft; 104 pages. "This Statement on Auditing Standards (SAS) addresses the auditor's responsibility to form an opinion and report on the audit of financial statements of employee benefit plans (EBPs) subject to [ERISA], hereinafter referred to as ERISA plans. It also addresses the form and content of the auditor's report issued as a result of an audit of ERISA plan financial statements.... When issued as final, this SAS is effective for audits of ERISA plan financial statements for periods ending on or after December 15, 2020. Early adoption is not permitted." (American Institute of Certified Public Accountants [AICPA])
Pension Accounting Changes Reduce Volatility and Increase Flexibility
"Now that the items most sensitive to the interest rate environment are no longer recorded against operating income, the volatile impact of pension and retiree medical plan costs on day-to-day operations is reduced, except in times of extreme interest rate volatility.... This separation of some pension costs from operating costs may open the door to considering new strategies." (Findley)
Form 5500s and the Proposal to Publicly Disclose Operational Noncompliance
"The [AICPA's] Proposed SAS would require auditors to disclose findings of noncompliance in the Report on Specific Plan Provisions Relating to the Financial Statements unless the findings are clearly inconsequential. This Report would form part of the official audit report that is attached to the Form 5500 and publicly available on the DOL's EFAST2 website. Public disclosure of operational noncompliance would present many issues for employers." (Winston & Strawn LLP)
FASB Changes to Defined Benefit Plan Disclosure Requirements
"The changes are aimed at improving the effectiveness of financial statement disclosures by eliminating the requirement for certain disclosures FASB no longer considers cost beneficial and requiring new disclosures that FASB considers relevant. The board does not anticipate significant cost increases because of the changes, as the information shown in the newly required disclosure should be readily available." (Pensions & Investments)
Alternatives for Pension Cost Recognition: Implementation Issues (PDF)
9 pages. "This practice note ... reviews a number of issues that may arise when implementing a granular approach to calculating pension cost, particularly the application of individual spot rates ... [M]any of the valuation-related issues discussed in this practice note may also have applicability under the traditional aggregated pension costing approach." (American Academy of Actuaries)
AICPA Working Draft of Chapter on Multiemployer Benefit Plans (PDF)
149 pages. "[This working draft has] been developed by the AICPA Multiemployer Plans Task Force to assist preparers of multiemployer plan financial statements in preparing [those] financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) and to assist auditors in auditing and reporting on such financial statements in accordance with generally accepted auditing standards." (American Institute of Certified Public Accountants [AICPA])
[Guidance Overview] Changes in Defined Benefit and OPEB Disclosure Requirements (PDF)
"[FASB] has issued a final Accounting Standards Update that affects pension and postretirement benefit accounting. The update adds, removes, and clarifies some current footnote disclosures. The final provisions vary somewhat from the proposed ASU issued in 2016 and take into account comments received on the utility of the information to financial statement users relative to the burden imposed on reporting entities. While some disclosure items were removed, some have been added, and the net effect could be an increase in the time required to complete disclosure information." (Buck)
Minimal FASB Changes to Defined Benefit Plan Disclosure Requirements
"The following disclosure requirements are added: [1] For cash balance and other plans with a promised interest crediting rate, the weighted average of the interest crediting rates. [2] Explanation of the reasons for significant gains and losses concerning the benefit obligation." (Findley)
[Guidance Overview] FASB Makes Minor Changes to Disclosure Requirements for Sponsors of DB Plans and Other Postretirement Benefits (PDF)
"The guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new ones that the FASB considers pertinent. The guidance is effective for fiscal years ending after 15 December 2020 for public business entities and fiscal years ending after 15 December 2021 for all other entities. Early adoption is permitted." (EY)
[Official Guidance] Text of FASB Accounting Standards Update 2018-14: Changes to the Disclosure Requirements for Defined Benefit Plans
39 pages. "The amendments in this Update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. [Certain] disclosure requirements are removed from Subtopic 715-20 ... The following disclosure requirements are added to Subtopic 715-20: [1] The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates. [2] An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments in this Update also clarify the disclosure requirements in paragraph 715-20-50-3[.]" (Financial Accounting Standards Board [FASB])
[Guidance Overview] The New ASOP 6: Implications for OPEB Reporting (PDF)
"In the most extreme case, let's consider a small plan sponsor in a pooled health plan where retirees pay 100% of the premiums. Under GASB 45 and the previous version of ASOP 6, this entity would not have any OPEB liability, because retirees are paying the entire premium and the community-rating exception allowed for the implicit rate subsidy to be ignored. Under the new ASOP 6 and GASB 74/75, the entity will have a liability due to the 'implicit rate subsidy,' which must now be recognized even in community-rated plans.Another type of plan where the impact will be large is one where the sponsor contributes a flat dollar amount per month to retirees in a pooled health plan." (Milliman)
[Guidance Overview] Impact of GASB 74/75 on Small Government Employers (PDF)
"[This article reviews] the Alternative Measurement Method (AMM), which is used by small government employers in lieu of an actuarial valuation. This AMM review is followed by a discussion of the important changes relevant to small government employers as GASB 74/75 takes effect." (Milliman)
[Official Guidance] Text of GASB Implementation Guide No. 2018-1: Implementation Guidance Update, 2018
This 25-page Implementation Guide addresses new questions about application of the Board's standards on pensions, other postemployment benefits, the statistical section, regulatory reporting, and tax abatement disclosures. The Implementation Guide also includes amendments to previously issued implementation guidance on relevant topics. (Governmental Accounting Standards Board [GASB])
[Guidance Overview] GASB 74/75: OPEB Expense and Balance Sheet Items (PDF)
"The OPEB expense on the income statement now arises from changes in the Net OPEB Liability (NOL) over the measurement period, which is calculated as the Total OPEB Liability (TOL) minus the Fiduciary Net Position (FNP).... Plans that provide OPEB benefits to fewer than 100 members may use the alternative measurement method, which simplifies some assumptions and calculations.... The Required Supplementary Information (RSI) is now to include several 10-year schedules." (Milliman)
When It Comes to Funding Pension or OPEB Liabilities, Not All Section 115 Trusts Are Created Equal
"With the advent of side-fund arrangements, we now have two types of 115 trusts: those designed to fund and pay pension and OPEB benefits directly and those designed to set aside monies from the general assets of the employer for future use toward pension or OPEB obligations. Much of the current confusion regarding whether 115 trust assets can be used to offset pension or OPEB liabilities for GASB purposes stems from proposed guidance issued by the GASB board in early 2017." (Best Best & Krieger LLP)
[Official Guidance] Text of GASB Implementation Guide No. 2017-3: Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
248 pages. "Questions and answers in this Implementation Guide address issues related to accounting and financial reporting for postemployment benefits other than pensions and for plans that are used to administer those benefits." (Governmental Accounting Standards Board [GASB])
AICPA's Progress Toward Improving Employee Benefit Plan Audits
"An enhanced peer review program was created with subject matter experts specific to employee benefit plan audits to review these engagements. The enhanced peer review program identified the following two trends: [1] 20% of engagements had material nonconformity related to improper utilization of SOC reports and certifications; and [2] More than 50% of engagements had material nonconformity related to inadequate or no documentation." (Schneider Downs)
Accounting for Pensions and Other Postretirement Benefits, 2017 (PDF)
28 pages. "At fiscal year-end 2016, the average discount rate used to calculate the present value of pension obligations decreased to 4.03%, compared with the 2015 rate of 4.33%.... The average projected benefit obligation (PBO) funded status (plan assets/PBO) was 81% at fiscal year-end 2016, a minor uptick from the 2015 level of 80%.... The fiscal year-end 2016 discount rate for other postretirement benefits ranges from 2.84% to 6.63% in the current survey, with an average of 4.04%. At fiscal year-end 2015, discount rates for companies included in this year's report ranged from 3.25% to 6.47%, with an average value of 4.28%." (Willis Towers Watson)
[Opinion] ERIC Comment Letter to AICPA on Proposed Modification of Auditing Standards for ERISA-Covered Employee Benefit Plans
"[1] The scope of the proposed changes are overly-broad and could discourage the use of limited scope audits. [2] The additional audit requirements change the nature of the audit process and disrupt the relationship between plan sponsors and auditors. [3] The scope of the changes in the Exposure Draft requires an economic analysis to show the economic impact of the proposed changes. [4] Future work on this Proposal should be delayed until the revised Form 5500 is finalized." (ERISA Industry Committee [ERIC])
[Guidance Overview] Group Health Plan Audit Requirement: Whom Do You Trust?
"If employee contributions are used for any purpose other than paying group health or HMO premiums, then benefits are not deemed to be paid solely from the employer's general assets -- and the audit requirement would apply.... [I]t seems clear that the audit requirement does not turn entirely on the question of whether or not the plan is funded through a trust. But note Q&A 18 published by the American Institute of Certified Public Accountants which states that relief from the audit requirement for contributory self-funded welfare plans with more than 100 participants is based on whether or not the plan is funded through a trust[.]" (Golan Christie Taglia)
[Guidance Overview] Proposed Statement of Auditing Standards: Redesigning the Audit Reporting Model for ERISA Plan Financial Statements
"In addition to changing the form and content of limited scope audit reports to better explain the auditors' responsibilities, the proposed SAS requires the auditor to report findings from procedures performed on specific plan provisions that affect the financial statements." (Belfint Lyons & Shuman, CPAs)
Accounting for Stock Compensation Under FASB ASC Topic 718 (PDF)
13 pages. "FASB ASC Topic 718 is in substantial convergence with the International Accounting Standard Board's final standard on Share-based Payment, except for transactions with nonemployees and nonpublic companies, and minor technical differences in regard to employee stock purchase plans, modifications, liabilities, and income tax effects. Topic 718 creates a more 'level playing field' for equity compensation design that has resulted in the increased prevalence of full-value and performance-vesting awards, and a corresponding decline in plain-vanilla, tax qualified, and reload stock options, and employee stock purchase plans." (FW Cook)
2017 Global Survey of Accounting Assumptions for Defined Benefit Plans (PDF)
"During 2016, investment returns on plan assets (both bond and stock returns) showed a mild performance in major markets and, in most cases, this performance was countered by declining interest rates, which left companies with minor changes in average projected benefit security ratio from prior year levels.... The majority of surveyed countries imply life expectancies between 20 and 30 years." (Willis Towers Watson)
ASBCA Grants $253 Million Northrop Post-Retirement Benefits Claim
"In rejecting DCMA's form-over-substance argument, the [Armed Services Board of Contract Appeals (ASBCA)] signaled that it will take a harder look at whether a contractor's noncompliance with a regulation was material and whether the claimed costs are valid and were incurred even if there has been a technical discrepancy in the contractor's cost accounting practices. While contractors must still comply with cost accounting rules, the ASBCA's decision strikes the right balance in situations where the contractor takes a good faith position that deviates from the applicable rules but the government denies a claim due to a technicality." (Blank Rome LLP)
Could Accrual-Based Accounting Aid Your Company's Retirement Plan?
"Cash-basis accounting means no confirmation of receivables and no confirmation of receivables means no real ability to track contributions on a participant level. This is how errors ... go unnoticed ... Once receivables are properly included in your reporting you'll actually have accurate financial reporting for the year, you'll have more accurate participant counts listed on the Form 5500, and the contributions listed on the Form 5500 will finally tie to your W3 and your corporate Form 1120!" (Benefit Resources Inc.)
[Official Guidance] Text of GASB Proposed Implementation Guide: Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
281 pages. "The objective of this Implementation Guide is to provide guidance that clarifies, explains, or elaborates on the requirements of Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended, and Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended. Questions and answers in this Implementation Guide address issues related to accounting and financial reporting for postemployment benefits other than pensions and for plans that are used to administer those benefits.... The requirements of this Implementation Guide apply to the financial statements of all state and local governments." [June 28, 2017; comments due to GASB by Sept. 25, 2017.]. (Governmental Accounting Standards Board [GASB])
Pension/OPEB 2017 Assumption and Disclosure Study (PDF)
23 pages. "The 2016 median discount rate for pension plans in the study decreased 20 basis points since 2015 and has decreased more than two full percentage since 2007 ... Median plan funding levels remained unchanged from 2015, with pension plan assets equal to approximately 82% of the projected benefit obligation (PBO) in 2016 and 2015.... The 2016 median discount rate for OPEB plans in the study decreased 25 basis points since 2015 and has decreased by more than two full percentage points since 2007 ... For OPEB plans that are funded, the median plan funding level has remained essentially unchanged, with OPEB plan assets equal to approximately 53% of the accumulated postretirement obligation (APBO) in 2016 compared with 54% in 2015." (PricewaterhouseCoopers)
[Guidance Overview] GASB 75: Proportionate Share Allocations for Cost-Sharing Employers (PDF)
"For cost-sharing plans, a 'proportionate share' for each employer must be developed to distribute the aggregate plan liability, deferred items, and expense among the employers' financial statements. Note that under GASB 75, the component government units of a single-employer plan may be required to provide a similar division of accounting metrics using the rules for cost-sharing plans." (Milliman)
Plan Sponsors Using Limited-Scope Audits Should Watch for Proposed Changes
"The proposed SAS requires the plan sponsor to acknowledge its responsibility when it comes to the audit. The auditor would be required to get it in writing.... This change will most likely increase plan sponsor costs, especially when plan sponsors opine on certified financial statements prepared by financial institutions. Plan sponsors may need to engage the appropriate subject-matter expert to comment on asset valuation and financial statement presentation." (HRDailyAdvisor)
Changing Retiree Medical Plan Benefits to Reduce OPEB Liabilities Under Governmental Accounting Rules (PDF)
"GASB 74 became effective for financial statements for fiscal years beginning after June 15, 2016. As governmental employers have begun to determine and report OPEB liabilities, a question has arise n similar to a question that had earlier arisen in the context of reporting pension liabilities -- whether the governmental employer can make changes to the plan to reduce the amount of liabilities." (Groom Law Group)
Text of CBO Answers to Questions from Senate Budget Committee on Funding Estimates for Federal Employee Pensions (PDF)
"Relative to cash estimates over a 10-year projection period ... an accrual measure would give policymakers a more accurate sense of whether proposed changes to deferred compensation would increase or decrease the deficit. That is particularly important when considering modifications to defined benefit pension plans because such plans involve commitments over long periods.... [But cost estimates] can vary substantially depending on the discount rate used for the accrual measure, which may make them less transparent than a cash-based measure. Accrual accounting also depends on decades of projections for future wages and inflation -- which are highly uncertain." (Congressional Budget Office [CBO])
FASB Issues Helpful Guidance on Accounting for Equity-Based Compensation
"The ASU should reduce the instances that an entity is required to apply modification accounting to a share-based payment award.... The ASU streamlines the application of modification accounting by stating that when making a change to the terms or conditions of a share-based payment award, a company should apply modification accounting to the award, unless each of [three] conditions is met[.]" (Winston & Strawn LLP)
[Official Guidance] Text of GASB Implementation Guidance No. 2017-2: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans
118 pages. "The objective of this Implementation Guide is to provide guidance that clarifies, explains, or elaborates on the requirements of Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended.... The requirements of this Implementation Guide apply to the financial statements of all state and local governments." (Governmental Accounting Standards Board [GASB])
State and Local Government Pensions at the Crossroads
"Underfunding, questionable investment decisions, imperfect assumptions on future market returns, declining interest rates, and the structure of defined benefit plans have created a fiscal crisis for many public pension funds. The implementation of several recent GASB pronouncements has made these problems more apparent and distinct to the public. The authors examine the current reporting challenges, describe the approaches taken by some governments, and suggest their own potential solutions." (The CPA Journal)
AICPA Proposes New Standard for ERISA Plan Audits
"The [DOL's] chief accountant had asked the [AICPA Audit Standards Board] to review the auditor reporting model for ERISA plan audits and provide improved public insight about the scope of responsibilities for management and the auditor. That review also was to include when management limits the audit scope, which is permitted by the DOL's ERISA regulations. DOL recommendations were considered as the proposed standard was developed." (
[Official Guidance] Text of Exposure Draft on Proposed Statement on Auditing Standards: Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (PDF)
133 pages. "The proposed [Statement on Auditing Standards (SAS)] includes the form and content of the auditor's report for an unmodified opinion, a new form of opinion when an ERISA-permitted audit scope limitation exists and reporting requirements on findings from procedures performed on specific plan provisions relating to the financial statements (either included in the auditor's report on the ERISA plan financial statements or issued as a separate report). The proposed SAS would apply to audits of single employer, multiple employer, and multiemployer plans subject to ERISA." (American Institute of Certified Public Accountants [AICPA])
Latest Pension Accounting Update May Be Huge -- or Not!
"Under the new standard, interest cost, amortizations and expected return on assets will be moved out of operating expenses. They will remain as other expenses on the income statement, but in a separate area outside of operations.... This change in recognition can result in a sudden increase or decrease in pension related operating expenses depending on each sponsor's situation. Frozen plans and those that are significantly underfunded will likely see reductions. While non-frozen, well-funded plans may actually see increases." (The Principal Blog)
[Guidance Overview] GASB Omnibus Statement Addresses Pension and OPEB Issues
"The issues covered by GASB Statement No. 85, Omnibus 2017, include: ...Timing of the measurement of pension and other postemployment benefits (OPEB) liabilities and related expenditures recognized in financial statements prepared using the current financial resources measurement focus ... Recognizing on-behalf payments for pensions or OPEB in employer financial statements ... Simplifying certain aspects of the alternative measurement method for OPEB." (Governmental Accounting Standards Board [GASB])
[Guidance Overview] FASB Changes the Presentation of Pension Cost (PDF)
"On March 10, 2017, the FASB issued final guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost).... The amendment requires the bifurcation of net benefit cost. The service cost component will be presented with other employee compensation costs in operating income (or capitalized in assets). The other components will be reported separately outside of operations, and will not be eligible for capitalization." (PricewaterhouseCoopers)
FASB Issues Accounting Standards Update
"[ASU 2017-07] amends ASC 715, Compensation -- Retirement Benefits, to require employers that present a measure of operating income in their statement of income to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses (together with other employee compensation costs). The other components of net benefit cost, including amortization of prior service cost/credit, and settlement and curtailment effects, are to be included in nonoperating expenses. Employers that do not present a measure of operating income are required to include the service cost component in the same line item as other employee compensation costs." (Willis Towers Watson)
FASB Changes Presentation of Defined Benefit Costs
"[T]he new standard requires a reporting organization to separate the service cost component from the other components of net benefit cost for presentation purposes. The new standard also: [1] Provides explicit guidance on how to present the service cost component and other components of the net benefit cost in the income statement. [2] Allows only the service cost component of net benefit costs to be eligible for capitalization." (Journal of Accountancy)
[Official Guidance] Text of FASB Accounting Standards Update 2017-07 (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (PDF)
58 pages. "The Board is issuing this Update primarily to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost... Topic 715, Compensation -- Retirement Benefits, does not prescribe where the amount of net benefit cost should be presented in an employer's income statement and does not require entities to disclose by line item the amount of net benefit cost that is included in the income statement or capitalized in assets.... To improve the reporting of net benefit cost in the financial statements, the Board added a standard-setting project to provide additional guidance on the presentation of net benefit cost in the income statement and on the components eligible for capitalization in assets." (Financial Accounting Standards Board [FASB])
[Guidance Overview] FASB Updates Employee Benefit Plan Master Trust Presentation, Disclosure Requirements
"The new standard is designed to make disclosures more useful to users of financial statements. All plans will be required to disclose the dollar amount of their interest in each general type of investment. This will supplement the existing requirement to disclose the master trust's balances in each general type of investment." (Journal of Accountancy)
[Official Guidance] Text of FASB Accounting Standards Update 2017-06: Employee Benefit Plan Master Trust Reporting
"This Update relates primarily to the reporting by an employee benefit plan for its interest in a master trust.... The amendments in this Update clarify presentation requirements for a plan's interest in a master trust and require more detailed disclosures of the plan's interest in the master trust. The amendments also eliminate a redundancy relating to 401(h) account disclosures." [This update addresses Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965).] (Financial Accounting Standards Board [FASB])
Accounting Treatment of Refund of Excess Contributions
"If a contribution is deposited to a retirement plan trust account, but is later treated as an excess contribution to be returned to a participant, is it still a contribution or did it never happen in the first place? It depends on each party's perspective.... Regardless of which method is used, financial statement auditors should disclose the accounting policy used for corrective distributions, as well as any differences between the reporting on Form 5500 and the financial statements." (Belfint Lyons & Shuman, CPAs)
Understanding Independent Qualified Plan Auditor Opinions on Financial Statements
"A disclaimer of opinion is given when there is a scope limitation on the audit procedures that precludes the auditor from performing the audit in accordance with Generally Accepted Auditing Standards (GAAS).... When an auditor performs a limited-scope audit, he or she does not perform audit procedures on testing investments and investment transactions. The [DOL] has allowed this type of audit to occur when a limited-scope certification is provided by a regulated financial institution such as a bank, trust company, or insurance company." (Belfint Lyons & Shuman, CPAs)
Ford Takes a $2 Billion Charge Due to Pensions, Benefits
"The automaker is changing how it values pensions and other retiree obligations and is now counting them in the year they were incurred instead of spreading out the impact over a number of years." (USA TODAY)
Understanding the Internal Controls Needed by a Retirement Plan
"Reviewing controls helps auditors understand the processes in place to administer each retirement plan and design the audit strategy to address any identified control weaknesses. Controls at the plan sponsor are important because they may help prevent mistakes in plan administration." (Belfint Lyons & Shuman, CPAs)
Fortune 1000 Companies: Accounting for Pensions and Other Postretirement Benefits, 2016
"At fiscal year-end (FYE) 2015, the average discount rate used to calculate the present value of pension obligations increased to 4.34%, compared to last year's rate of 3.98% for companies in this year's report. The salary scale assumption at FYE 2015 used to project current pay remained essentially unchanged at an average value of 3.60%. For companies in this year's report, the expected rate of return on asset assumptions decreased 18 basis points, down to 6.95% from FYE 2014 to FYE 2015." (Willis Towers Watson)
2016 Pension Accounting Preview: A Positive Outlook
"Many [DB] plan sponsors are aware that interest rates dropped significantly in the first half of 2016 but staged a remarkable rise since the November election. Combined with relatively strong equity returns, 2016 year-end pension disclosures may not be as bad as expected 6 to 8 weeks ago." (Van Iwaarden Associates)
[Guidance Overview] Changes to Employee Benefit Plan Auditor's Reports May Be on the Way
"Changes to the auditor's report were intended to better help the auditors understand their responsibilities as well as to provide users of the financial statements with additional information on what the auditors do.... Much of the auditor's report under the proposed [Statement of Auditing Standards] will look familiar; however, there are some new aspects to it. Highlighted [in this article] are some of these difference for limited and full-scope audits, including whether the changes apply only to limited or full-scope audits." (Schneider Downs)
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