Accounting & Auditing | Business and Industry | Legislative & Regulatory

Employee benefit plan master trust reporting addressed in new FASB standard

The Financial Accounting Standards Board issued an Accounting Standards Update on February 27 to clarify and improve financial reporting by employee benefit plans. The new guidance, contained in ASU 2017-06 focuses on employee benefit plan reporting relating to master trusts, and represents the accounting board's concurrence with a consensus of its Emerging Issues Task Force.

According to the FASB, ASU 2017-06, entitled, 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), "relates primarily to the reporting by an employee benefit plan (a plan) for its interest in a 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."

Currently, employee benefit plans are required to disclose their interest in a master trust, including: the fair value of investments held by the master trust by general type of investment; the net change in the fair value of investments of the master trust; the total investment income of the master trust by type; a description of the basis used to allocate net assets, net investment income or loss, and gains or losses to participating plans; and the plan’s percentage interest in the master trust.

The impetus for the EITF to take up this issue, according to the FASB, was:

  • Many stakeholders find the master trust disclosure requirements in generally accepted accounting principles (GAAP) to be limited and incomplete, particularly relating to disclosures of the plan’s interest in the master trust.
  • Most preparers rely on the AICPA Audit and Accounting Guide, Employee Benefit Plans, to develop master trust disclosures in plan financial statements.
  • Because many employee benefit plans hold investments in master trusts, some stakeholders have said that master trust disclosures is an area in which standard setting is needed.

ASU 2017-06 clarifies the presentation requirements for an employee benefit plan's interest in a master trust, and requires more detailed disclosures of the plan’s interest in the master trust. The FASB also notes that the new standard eliminates a redundancy relating to 401(h) account disclosures.

Effective date and transition

The amendments in this ASU 2017-06:

  • are effective for fiscal years beginning after December 15, 2018, and
  • early adoption is permitted.

As to transition method, entities are required to apply the amendments in ASU 2017-06 retrospectively to each period for which financial statements are presented.

Refer to the full text of ASU 2017-06, and learn more about employee benefit plan auditing and sponsorship at the MACPA's 2017 Employee Benefit Plan Conference, detailed below.

2017 Employee Benefit Plan Conference

The MACPA's annual Employee Benefit Plan (EBP) Conference, taking place this year on May 15, offers great networking opportunities for those who join us in-person in Columbia, MD, as well as a convenient simulcast option to join us from your home or office. The EBP conference equips CPAs in the public and private sector with guidance to better audit and operate employee benefit plans.

The EBP conference offers three tracks (Basic, Intermediate/Advanced and Plan Sponsors),  Speakers include Michael Auerbach, Acting Chief Accountant, U.S. Department of Labor, Employee Benefits Security Administration (EBSA), and leading experts from law firms and audit firms.

Additional information about the conference, and registration options to attend in-person or via simulcast, can be found at MACPA's 2017 Employee Benefit Plan Conference.  Take advantage of the early bird registration rate, in effect through April 14.


Edith Orenstein