9 9 DOL Field Assistance Bulletin 2004-1(https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2004-01); DOL Field Assistance Bulletin 2006-2 (https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2006-02).
10 10 IRS Notice 2011-1 provides that these rules will not be enforced until after regulations are issued. Regulations were issued on July 18, 2016, with the effective date generally deferred to plan years beginning on or after January 1, 2017.
11 11 IRC Section 436.
12 12 DOL Advisory Opinion 2012-04A.
13 13 See www.irs.gov/pub/irs-tege/rollover_chart.pdf for guidance for restrictions on certain rollovers.
Chapter 2 Accounting and Reporting Standards
Learning objectives
After completing this chapter, you should be able to do the following:
Identify applicable authoritative guidance surrounding employee benefit plans.
Recognize unique accounting, reporting, and other requirements for employee benefit plan financial statements.
Recognize accounting and reporting for merging and terminating plans.
Identify recent developments affecting accounting and reporting for employee benefit plans.
Introduction
This chapter will address applicable guidance as well as recent developments in the industry.
Employee benefit plans are governed by standards of accounting and reporting provided by FASB through the codification. The Department of Labor (DOL) and IRS also have authority to issue regulations for reporting and disclosure requirements of benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA).
This course will not address accounting or reporting for governmental employee benefit plans, which are governed by statements issued by GASB.
In addition, this chapter will not address additional accounting or reporting requirements for plans of issuers subject to the provisions of the Sarbanes-Oxley Act, the regulations of the SEC, and the rules and standards of PCAOB.
Knowledge check
1 Which authoritative standards are used for the accounting and reporting for nonissuer employee benefit plans?FASB through the codification.SEC and PCAOB.DOL.IRS.
Applicable guidance
Generally accepted auditing standards and accounting principles apply to employee benefit plans. In addition, the AICPA Audit and Accounting Guide Employee Benefit Plans, provides guidance to practitioners on certain accounting, auditing, and reporting matters unique to employee benefit plans.
Defined benefit, defined contribution, and health and welfare are types of employee benefit plans. The objectives of financial reporting for all types of employee benefit plans are to report the resources available to fund participant benefits and the claims on those benefits. Regardless of plan type, employee benefit plan financial statements should include a statement of net assets available for benefits as of the end of the year and a statement of changes in net assets available for benefits. Defined benefit plans have additional statements in connection with disclosing the actuarial present value of accumulated benefits. Common elements in the financial statements of an employee benefit plan include investments, contributions receivable and received, investment income receivable and received, net appreciation (depreciation) in the fair value of investments, benefits paid and expenses paid. Refer to appendixes A– C and B-1–C-1 in this course and appendixes C–F in the Audit and Accounting Guide Employee Benefit Plans for illustrative financial statements and disclosures by plan type.
FASB ASC 960, plan accounting: Defined benefit pension plans
FASB Accounting Standards Codification (ASC) 960 provides guidance on financial accounting and reporting for defined benefit plans and includes the following subtopics:
1 Overall
2 Accumulated Plan Benefits
3 Net Assets Available for Plan Benefits
4 Terminating Plans
5 Presentation of Financial Statements
6 Receivables
7 Investments – Other
8 Property, Plant, and Equipment
FASB ASC 962, plan accounting: Defined contribution pension plans
FASB ASC 962 provides guidance on accounting and reporting for defined contribution plans and includes the following subtopics:
1 Overall
2 Terminating Plans
3 Presentation of Financial Statements
4 Notes to Financial Statements
5 Receivables
6 Investments – Other
FASB ASC 965, Plan accounting: Health & welfare benefit plans
FASB ASC 965 provides guidance on accounting and reporting for health and welfare benefit plans and includes the following subtopics:
1 Overall
2 Net Assets Available for Plan Benefits
3 Plan Benefit Obligations
4 Terminating Plans
5 Presentation of Financial Statements
6 Receivables
7 Investments – Debt and Equity Securities
8 Investments – Other
9 Property, Plant, and Equipment
Fair value measurements
FASB ASC 820, fair value measurement
FASB ASC 820 applies whenever other standards require or permit assets or liabilities to be measured at fair value. This guidance establishes a fair value hierarchy and gives the highest priority to quoted market prices. FASB ASC 820 indicates that the determination of fair value should be based on assumptions (or inputs) market participants would use in pricing the asset or liability. Such inputs can be divided between those that are developed using market data (known as observable inputs) and those for which market data is not available and that the reporting entity develops based on the best information available (known as unobservable inputs). FASB ASC 820-10-35 describes valuation