Plan Accounting: Defined Benefit Pension Plans (Topic 960)

The Board is issuing this Update to improve the usefulness of the information
reported to users of employee benefit plan financial statements and to provide clarity to preparers and auditors. This Update relates primarily to the reporting by an employee benefit plan (a plan) for its interest in a master trust. A master trust is a trust for which a regulated financial institution (bank, trust company, or similar financial institution that is regulated, supervised, and subject to periodic examination by a state or federal agency) serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or by a group of employers under common control are held.

Current disclosure guidance about an employee benefit plan’s interest in a master trust in Topic 960, Plan Accounting—Defined Benefit Pension Plans, and Topic 962, Plan Accounting—Defined Contribution Pension Plans, includes requirements for a plan to disclose the following items: the fair value of investments held by the master trust by general type of investment; the net change in the fair value of investments of the master trust; the total investment income of the master trust by type; a description of the basis used to allocate net assets, net investment income or loss, and gains or losses to participating plans; and the plan’s percentage interest in the master trust.

Many stakeholders find the master trust disclosure requirements in generally
accepted accounting principles (GAAP) to be limited and incomplete, particularly relating to disclosures of the plan’s interest in the master trust. Most preparers rely on the AICPA Audit and Accounting Guide, Employee Benefit Plans, to develop master trust disclosures in plan financial statements. Because many employee benefit plans hold investments in master trusts, some stakeholders have said that master trust disclosures is an area in which standard setting is needed. 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.

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