March 8, 2017

FASB Updates Reporting Requirements for Master Trust Investments of Benefit Plans

On February 27, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 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 (“Master Trust Update” or “Update”).*

A master trust is a trust for which a regulated financial institution serves as a trustee or custodian and which holds the assets of more than one plan sponsored by a single employer or by a group of employers under common control.

The Update addresses the reporting requirements for plan investments held in a master trust, formalizing changes that were proposed in an exposure draft released last July. FASB indicates that it is issuing the Update “to improve the usefulness of the information reported to users of employee benefit plan financial statements and to provide clarity to preparers and auditors.”

In general, for plans that hold an interest in a master trust, the Update clarifies the applicable reporting requirements for that interest and requires more detailed disclosures with respect to its composition. For example, for each master trust in which a plan invests, the plan will have to present the plan’s interest in the trust, and any changes in that interest, as separate line items (not a single item). Further, to address situations in which a plan holds different interests in different investments of the master trust, the Update requires plans to identify their dollar investment in each specific master trust investment. The Update also eliminates a redundancy relating to disclosures of defined benefit (DB) plan §401(h) retiree health account investments. Currently, these investments must be disclosed in health and welfare plan disclosures as well as DB plan disclosures. The Update eliminates the health and welfare plan disclosure of §401(h) plan investments.

The Master Trust Update is effective for fiscal years beginning after December 15, 2018, but early adoption is permitted. The Update must be applied retrospectively to each period for which financial statements are presented.

 

* A trust that holds the assets of plans sponsored by two or more unrelated employers or controlled groups is a collective trust or a group trust, not a master trust.

Contact an Expert