The accounting and disclosures around multi-employer pension plans may not get as onerous as companies first feared after the Financial Accounting Standards Board decided to ease up on its planned new requirements.

Multi-employer pension plans are defined benefit pension plans typically bargained through labor unions or other industry groups. While companies make extensive disclosures about their obligations and assets related to their own corporate pension plans, they are required to say little about their obligations to contribute to multi-employer plans, says Ken Stoler, a partner with PwC, even when those plans are even more poorly funded than traditional corporate plans. Companies show their contributions as an expense but provide no information about any future contributions they may face, even as the liability mounts to prop up or bail out crippled plans.

The FASB fielded investor grumblings and developed a proposed accounting standards update that would dramatically expand the disclosures companies would be required to make regarding their duty to fund such multi-employer plans, which are not administered by the companies directly but by third parties who manage the plans on behalf of all participants. “The companies who would have to prepare the disclosures were very concerned,” says Stoler. “The information is not currently available, so it would be difficult, time consuming, and costly to try to obtain the information.”

FASB has decided to drop its planned requirement for companies to disclose their withdrawal liability, or the amount it would have to pay if it were to suddenly withdraw from or exit the plan. Instead, FASB plans to require companies to disclose a variety of information about the plan's funded status and some data that would give investors a sense for what portion of that any funding requirement might ultimately fall to the company and what its overall obligation to any number of different multi-employer plans might be like.

FASB also plans to drop other disclosures originally mapped out in its proposal, including the number of multi-employer plans in which the company participates, the total assets and accumulated benefit obligation of multi-employer plans, the contributions to a given plan as a percentage of total contributions, the percentage of employees that are covered by such plans, and supplemental information about plans where no withdrawal liability can be calculated.

PwC director Gina Klein says FASB's new direction would flesh out a company's obligation to multi-employer plans in the least burdensome way among the alternatives it was considering. “If a company contributed $500,000 for one multi-employer plan, and several other companies make contributions to the plan totaling $1 million, you know 50 percent of the obligation may be related to that one particular employers, so you can gauge where the employer position is relative to the plan,” she says.

According to Klein, who has followed FASB's deliberations closely, FASB is on target to finalize the standard this summer so it can take effect for 2011 year-end financial statements for calendar year companies.

Topics