FASB Proposes Disclosure about Participation in a Multiemployer Plan; Legacy Submits Comment Letter

The FASB issued a Proposed Accounting Standards Update (ASU), Disclosure about an Employer's Participation in a Multiemployer Plan, that is intended to increase transparency in financial reporting of entities that participate in multiemployer pension and other postretirement benefit plans. Although the FASB proposal does not apply to the benefit plan's financial statement disclosures, it will affect the plan's contributing employers and will require plans to respond to a surge in demand for information.

The proposal would require numerous new quantitative and qualitative disclosures, disaggregated by plan or groups of similar plans, including:

• The number of plans in which the employer participates.
• For individually material plans, the name of the plan(s).
• Narrative descriptions of all of the following:
• The employer’s exposure to significant risks and uncertainties arising from its participation in the plan(s).
• How benefit levels for plan participants are determined.
• Whether the employer is or is not represented on the board of trustees of the plan(s) or a similar body.
• The consequences the employer may face if it ceases contributing.
• Any funding improvement plan(s) or rehabilitation plan(s), including the expected effects on the employer. For plans in regulatory warning zones, the warning status and remedies being considered by the plan(s) should be described, if known.
• Total assets and accumulated benefit obligations of the plan(s).
• Employer’s contributions as a percentage of total contribution to the plan(s) and, for comparability, that percentage for the corresponding prior periods.
• A description of the contractual arrangement(s), including all of the following:
• The term of the current arrangement(s).
• For each future year covered by a contract, the agreed-upon basis for determining contribution(s).
• Any minimum contribution(s) required by the agreement(s).
• Percentage of the employer’s employees covered by such plan(s).
• Quantitative information about the employer’s participation in the plan(s), for example, the number of its employee participants as a percentage of total plan participants disaggregated between active and retired participants, if obtainable, as of the most recent date available.
• Amount of contributions for the current reporting period.
• Expected contributions for the next annual period.
• Known trends in contributions, including the extent to which a surplus or deficit in the plan may affect future contributions.
• For plans for which an amount is required to be paid on withdrawal from the plan or windup of the plan:
• Details of any agreed deficit or surplus allocation to participating employers on windup.
• The amount that is required to be paid on withdrawal from the plan as of the most recent date available, if that information is obtainable.
• If the amount required to be paid on withdrawal is not obtainable, information about the employer’s relative participation in those plans (such as percentage of total contributions to such plans or percentage of participants covered by such plan(s)).

If approved, the proposed ASU would apply to public companies for fiscal years ending after December 15, 2010, and to nonpublic companies for fiscal years beginning on or after December 15, 2010.

As with all proposed ASUs, FASB invited individuals and organizations to provide their comments. The comment deadline recently expired on November 1, 2010. Legacy Professionals LLP joined in with many other organizations to voice significant concerns regarding the imprecise nature of these disclosures as well as the effect that implementation would have both on benefit plans and their participating employers. If you would like to read our letter, it is posted, along with over 200 others, at www.fasb.org. Under “Projects,” select “Comment Letters,” then select the document title “Disclosure about an Employer's Participation in a Multiemployer Plan.”

Let us know if you have any questions.

By Eileen E. Brassil, CPA, Partner, ebrassil@legacycpas.com