On 27 February 2017, the FASB issued ASU No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. The FASB issued this ASU to improve the usefulness of the information reported to users of employee benefit plan financial statements and to provide clarity to preparers and auditors.
The amendments in this ASU relate primarily to the reporting by an employee benefit plan for its interest in a master trust. A master trust is a trust for which a regulated financial institution 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.
The amendments in this ASU are summarized as follows:
- Presentation of interest in a master trust in separate line items – Current guidance in Topic 960 requires that investments in master trusts be presented in the statement of net assets available for benefits. Similar guidance is not provided in Topic 962 or 965, which has resulted in diversity in practice. The amendments in this ASU require a plan’s interest in that master trust and any change in that interest to be presented 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, respectively.
- Removal of disclosure requirement of percentage interest in the master trust – Current guidance in Topics 960 and 962 requires plans to disclose their percentage interest in the master trust and a list of the investments held by the master trust within the plan’s financial statements, which stakeholders have stated could be misleading.
- Disclosure requirement to include other asset and liability balances – Stakeholders noted that disclosure of those balances (not currently required) is necessary to understand the single line item presented in the statement of net assets available for benefits.
- Removal of investment disclosures relating to 401(h) account assets – The amendments in this ASU removes redundancy noted by stakeholders and do not require that the investment disclosures relating to the 401(h) account assets be provided in the health and welfare benefit plan’s financial statements.
Effective dates and transition requirements
The amendments in this ASU are effective for fiscal years beginning after 15 December 2018. Early adoption is permitted.
An entity should apply the amendments in this ASU retrospectively to each period for which financial statements are presented.