Employee Benefit Plan Master Trust Reporting
The Financial Accounting Standards Board (FASB) recently released an Accounting Standards Update (ASU) (ASU 2017-06) aimed at standardizing and clarifying the disclosures related to an employee benefit plan’s interest in a master trust*. This ASU applies to entities within the scope of Topic 960 (Defined Benefit Pension Plans), Topic 962 (Defined Contribution Pension Plans), and Topic 965 (Health and Welfare Benefit Plans).
Under current Generally Accepted Accounting Principles (GAAP), the disclosure requirements for master trusts are not uniform under the three topics mentioned above. The evolution of employee benefit plans (and more specifically, defined contribution plans) has resulted in a need to clarify and improve some of the GAAP requirements relating to master trusts. This ASU, which is effective for fiscal years beginning after December 15, 2018 (with early adoption permitted), includes the following:
- For each master trust in which a plan holds an interest, a plan shall present that interest and the change in that interest in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits.
- The requirement to disclose the percentage interest in the master trust for plans with divided interests is removed. All plans are required to disclose the dollar amount of their interest in each of the general type of investments held by the master trust.
- All plans are required to disclose (1) their master trust’s other assets and liabilities balances (i.e. amounts due from/to brokers, accrued interest and dividends, accrued expenses) and (2) the dollar amount of the plan’s interest in each of those balances.
- For health and welfare plans with 401(h) account assets, the investment disclosures are not required to be provided. Instead, to avoid redundancy, the health and welfare plans are required to disclose the name of the defined benefit pension plan in which those investment disclosures are provided, so that participants can easily access those statements for information about the 401(h) account assets, if needed.
For the full text of the ASU (which includes example disclosures), please visit the FASB’s website at www.fasb.org.
Remember…for assistance with answers to your employee benefit plan questions, please contact the experts at Fortner, Bayens, Levkulich, & Garrison, P.C.
*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.