FASB Reduces Employee Benefit Plans' Complexity

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By Denise Lugo

July 31 — The Financial Accounting Standards Board July 31 issued new rules aimed at simplifying employee benefit plan accounting.

FASB issued three separate accounting standard updates under one document to reduce complexity about the following:

• fully benefit responsive investment contracts (FBRICs);

• plan investment disclosures; and

• a measurement date for employee benefit plans.


All three standards are effective for fiscal years beginning after Dec. 15, 2015.

Benefit-Responsive Investment Contracts

The rules addressing FBRICs, designates contract value as the only required measure for them. It simplifies accounting for such contracts by eliminating the requirement to present and disclose FBRICs at fair value.

Contract value is the amount participants normally would receive if they were to initiate permitted transactions under the terms of the underlying plan, the ASU states.

In terms of disclosures, plans are required to continue to provide disclosures to help users understand the nature and risks of FBRICs, according to a summary of the provisions.

The rules require retrospective application.

Plan Investment Disclosures

The guidance related to plan investment disclosures requires plan investments to be disaggregated only by general type as required under plan accounting Topic 960, Defined Benefit Pension Plans; Topic 962, Defined Contribution Pension Plans; and Topic 965, Health and Welfare Benefit Plans.

It eliminates the need to disaggregate the investment in multiple ways, the ASU states.

Furthermore, for both participant-directed investments and nonparticipant-directed investments, the guidance eliminates some disclosures related to investments that represent five percent or more of net assets; investments at net asset value; and, net appreciation or depreciation.

The guidance also addresses investments measured using the net asset value per share practical expedient in Topic 820, Fair Value Measurement.

If that investment is in a fund that files a DOL Form 5500, Annual Return/Report of Employee Benefit Plan, as a direct filing entity, disclosure of that investment's strategy will no longer be required, the ASU states.

These rules also require retrospective application.

Measurement Date Practical Expedient

The guidance addressing the measurement date allows employee benefit plans to apply a measurement date practical expedient to measure investments and investment-related accounting using the month-end that is closest to the plan's fiscal year-end, when the fiscal period doesn't coincide with a month's end.

Disclosure requirements are contingent on the time of applying the practical expedient, according to a summary of the key provisions.

These rules require prospective application, the ASU states.

Title of ASU

All three ASUs were issued under Update 2015-12, titled: Plan Accounting: Defined Benefit Pension Plans Topic 960, Defined Contribution Pension Plans Topic 962, Health and Welfare Benefit Plans Topic 965: (Part I) Fully Benefit Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (consensuses of the Emerging Issues Task Force).

To contact the reporter on this story: Denise Lugo in Norwalk, Conn., at dlugo@bna.com

To contact the editor on this story: Laura Tieger Salisbury at lsalisbury@bna.com

For a copy of the ASU go to: http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176166228978&mc_cid=97a111ba4f&mc_eid=2f8c77068c