PBMares Accounting Blog

Plan’s Interest in a Master Trust - Disclosure Requirements

Posted by Neena Shukla, CPA, CFE, CGMA, FCPA on Apr 10, 2017 8:50:00 AM

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ASU Issued:

The Financial Accounting Standards Board (FASB) issued ASU 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 (a consensus of the Emerging Issues Task Force), on February 27, 2017.

Effective Date and Transition:

ASU 2017-06 is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. An entity should apply the ASU retrospectively to each period for which the financial statements are presented.

Summary:

ASU 2017-16 clarifies the presentation and disclosure requirements for an employee benefit plan’s interest in a master trust.

Key Provisions:

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.

Due to current disclosure requirements being considered limited, incomplete and inconsistent among plan types, the new ASU was issued.

  • For each master trust in which a plan holds an interest, the plan’s interest in that master trust and any change in that interest must 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
  • Plans with divided interests are no longer required to disclose the percentage interest in the master trust. However, all plans are required to disclose the dollar amount of their interest in each of those general types of investments. This supplements the existing requirement to disclose the master trust’s balances in each general type of investments.
  • All plans, regardless of type, that hold an interest in a master trust are required to disclose:
  1. Their master trust’s other asset and liability balances, (for e.g. amounts due to brokers for securities purchased, amounts due from brokers for securities sold, accrued interest and dividends, and accrued expenses), and
  2. The dollar amount of the plan’s interest in each of those balances.
  • For health and welfare benefit plan financial statements, previously required investment disclosures relating to 401(h) account assets are no longer required. Under the ASU the health and welfare benefit plan is required to disclose the name of the defined benefit pension plan in which those investment disclosures are provided. That way, participants can easily access those statements for information about the 401(h) account assets, as needed.

The ASU includes an example of a plan with a divided interest in a master trust. The amendments update and align the disclosure requirements for an interest in a master trust across topics 960, 962 and 965.

Topics: Employee Benefit Plans, Government Contracts

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Neena Shukla, CPA, CFE, CGMA, FCPA

Neena is an assurance partner and government contracting niche leader at PBMares, LLP, in Fairfax. She is also the leader of the firm’s technical and emerging issues group.

For more information, please contact the author at nshukla@pbmares.com or visit: www.pbmares.com.

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