FASB Changes Master Trust Investments Disclosures for Benefits Plans

March 2017

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (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 amendments to the FASB Accounting Standards Codification in ASU 2017-06 relate 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.

Under Topic 960, investments in master trusts are presented in a single line item in the statement of net assets available for benefits. The FASB Codification does not, however, provide similar guidance in Topic 962 or 965 for master trusts in defined contribution or health and welfare benefit plans: this has resulted in diversity in practice. ASU 2017-06 establishes requirements for these trusts to eliminate this diversity in practice. The amendments provide that for each master trust in which a plan holds an interest, it is required that a 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.

Topics 960 and 962 currently require plans to disclose their percentage interest in the master trust and a list of the investments held by the master trust, presented by general type, within the plan’s financial statements. ASU 2017-06 removes the requirement to disclose the percentage interest in the master trust for plans with divided interests and requires that all plans disclose the monetary amount of their interest in each of those general types of investments.

Under current US Generally Accepted Accounting Principles (GAAP), plans are not required to disclose the master trust’s other assets and liabilities. Examples of those balances include amounts due from brokers for securities sold, amounts due to brokers for securities purchased, accrued interest and dividends, and accrued expenses. ASU 2017-06 requires all plans to disclose: (a) their master trust’s other asset and liability balances; and (b) the monetary amount of the plan’s interest in each of those balances.

Finally, ASU 2017-06 eliminates the requirement to provide investment disclosures relating to the 401(h) account assets in the health and welfare benefit plan’s financial statements. The amendments will require the health and welfare benefit plan to disclose the name of the defined benefit pension plan in which those investment disclosures are provided, so that participants can easily access those statements for information about the 401(h) account assets, if needed.

The ASU 2017-06 amendments are effective for fiscal years beginning after 15 December 2018, with early adoption permitted. The amendments should be applied retrospectively to each period for which financial statements are presented. The amendments apply to reporting entities within the scope of Topic 960, Plan Accounting - Defined Benefit Pension Plans, Topic 962, Plan Accounting - Defined Contribution Pension Plans, or Topic 965, Plan Accounting - Health and Welfare Benefit Plans.

ASU 2017-06 is available on the FASB website on this link.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved.