Proposed Changes to Master Trust Reporting

Although the types of employee benefit plans (EBP) investing in master trusts and the ways in which they are investing in master trusts have changed, the accounting guidance surrounding these investments has remained stagnant. In response, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU), Employee Benefit Plan Master Trust Reporting. If adopted, the ASU would modify the presentation and disclosure requirements with respect to master trusts under the EBP Topics. Although the final ASU is still being drafted, the FASB’s Emerging Issues Task Force has reached consensus on the following:

  • All plans should present their interest in the master trust and change in interest as a single line item in the financial statements
  • All plans should disclose the dollar amount of its interest in each general type of investment held by the master trust
  • All plans should disclose the plan’s interest in other assets and liabilities as well as the master trust’s other assets and liabilities in total
  • For plans with a divided interest in the master trust, the requirement to disclose the plan’s overall percentage interest in the master trust is removed
  • Health and welfare plans should not report investment disclosures for 401(h) account assets, to eliminate disclosing redundant information in the defined benefit pension plan financial statements. However, the health and welfare plan financial statements need to reference the defined benefit pension plan where that investment disclosure is made.

The final ASU is expected to be issued in the first quarter of 2017 and will be effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The amendments should be applied retrospectively to all periods reported in the year of adoption, and disclosure should be made of the nature and reason for the change in accounting principle.

Please visit the FASB’s project page for additional information.

Johnson Lambert
Johnson Lambert | Author