Project Update

Phase II: Postretirement Benefit Obligations, Including Pensions

Project Summary

Last Updated: February 12, 2014

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Objectives
Due Process Documents
*Decisions Reached at the Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
*Board Meeting and Public Meeting Dates
History and Background
*Contact Information

Objectives

The objective of this project is to comprehensively reconsider employers’ accounting for pensions and other postretirement benefits in FASB Statements No. 87, Employers’ Accounting for Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to improve the quality of the information provided to investors, creditors, employees, retirees, donors, and other users of the financial statements. The project is being conducted in phases with an end goal of convergence.

Due Process Documents

In September 2006, the Board issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans. In February 2007, the Board issued FASB Staff Position FAS 158-1, Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides. FSP 158-1 updates the illustrations in those documents to reflect the provisions of Statement 158. With the issuance of Statement 158 and the FSP, the Board completed phase 1 of this project. The proposed FSP to amend Statement 132(R) was exposed on March 18, 2008, with a 45-day comment period ending May 2, 2008.

In December 2008, the Board issued FSP FAS 132(R)-1, Employers’ Disclosures About Postretirement Benefit Plan Assets. FSP FAS 132(R)-1 provides guidance on an employers’ disclosures about plan assets of a defined benefit pension or other postretirement benefit plan.

FAS 158

FSP FAS 158-1

FSP FAS 132(R)-1

*Decisions Reached at the Last Meeting

At the Agenda Prioritization meeting on January 29, 2014, the Board decided to remove Pensions and Other Postretirement Benefits from its agenda and add a research project on issues with measuring an employer’s defined benefit obligation for cash balance plans.

*Summary of Decisions Reached to Date

After comprehensively reconsidering the accounting for Pensions and Other Postretirement Benefits since 2012, the FASB decided to remove Pensions and Other Postretirement Benefits from its agenda and add a research project on measuring an employer’s defined benefit obligation for cash balance plans. 

*Next Steps

On January 29, 2014, the Board met to prioritize the FASB's agenda and voted to remove this project from the Board's agenda.

*Board Meeting and Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final Statement, Interpretation, or FSP.

The following are links to minutes for each meeting.

Below is a list of the FASB Board/Public meetings. Minutes for meetings generally are posted within two weeks following the meeting.

PHASE 3
*January 29, 2014 Board Meeting—The Board decided to remove this project from its agenda and add a research project on issues with measuring an employer’s defined benefit obligation for cash balance plans
PHASE 2
October 29, 2008 Board Meeting—Decisions on disclosures about fair value measurements of plan assets in the proposed FSP FAS 132(R)-a
September 24, 2008 Board Meeting—Decisions on disclosures about categories of plan assets and concentrations of risk in plan assets of the proposed FSP FAS 132(R)-a
July 16, 2008 Board Meeting—Redeliberations of proposed FSP FAS 132(R)-a
February 13, 2008 Board Meeting—Decision on amendments to Statement 132 (R)
November 14, 2007 Board Meeting—Statement 157 Implementation Decision
August 29, 2007 Board Meeting—Phase 2 direction and timing for the project on pensions and other postretirement benefits
PHASE 1
January 30, 2007 Board Meeting—Proposed FSP FAS 158-a “Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides”
November 29, 2006 Board Meeting—Proposed FSP FAS 158-a “Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to Related Staff Implementation Guides”
October 3, 2006 UAC Meeting
September 21, 2006 FASAC Meeting
August 2, 2006 Board Meeting—Disclosures and Other Matters Raised by Respondents
July 26, 2006 Board Meeting—Effective Date for Recognition Provisions; Measurement Date Provisions; Illustrations
July 19, 2006 Board Meeting—Classification of Net Postretirement Asset or Liability as Current or Noncurrent in a Classified Balance Sheet; Reporting Issues Related to Not-for-Profit Organizations
July 12, 2006 Board Meeting—Scope and Objectives; Retrospective Application Implementation Issues
June 27, 2006 Roundtable
June 21, 2006 SBAC Meeting
March 15, 2006 Board Meeting—Applicability to Not-For-Profit Organizations; Effective Dates for Nonpublic Entities, including Not-For-Profit Organizations; Guidance about the Selection of the Discount Rate Assumption; and Cost-Benefit Considerations
January 18, 2006 Board Meeting—Disclosures, Transition, Effective Date, and Length of Comment Period
December 14, 2005 Board Meeting—Objective and Scope
November 10, 2005 Board Meeting—Agenda Decision

History and Background

Disclosure—Statement 132(R)

In 2003, the FASB issued Statement 132(R), which addressed concerns about the need for enhanced disclosures for plan assets, cash flows for benefit payments and contributions, and components of net benefit cost reported in interim periods. Statement 132(R) did not, however, address other related concerns, including the following:

  • Delayed recognition 
    • Expected long-term return on plan assets
    • Actuarial gain and losses amortized subject to 10 percent corridor
    • Calculated value of assets for expected return on assets and 10 percent corridor
    • Prior service costs amortized over active service period 
  • Combining of service cost, asset returns, and financing costs
  • Insufficient information about cash flows
  • Measurement of the liability 
    • Projected benefit obligation versus accumulated benefit obligation versus termination liability
    • Cash balance plans and plans with lump-sum benefits
    • Discount rate(s) to use
  • Assumptions Requirements 
    • Discount rate and expected rate of return on assets
  • Contributions-based accounting for an employer’s participation in a multiemployer plan
  • Insufficient and overly complex disclosures
Recognition and Measurement—FASB Project


In 2005, the SEC staff issued its Report and Recommendations Pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 on Arrangements with Off-Balance Sheet Implications, Special Purpose Entities, and Transparency of Filings by Issuers. In that Report, the SEC staff identified defined benefit pension plan accounting as one of the topics that should be added to the Board’s technical agenda and recommended that it be addressed jointly with the IASB. The SEC staff concluded that reconsidering the accounting for defined benefit pension plans is necessary to improve the quality and transparency of financial statements and to eliminate inconsistent accounting treatment for pensions (for example, changes in estimates of benefit obligations are not treated in the same manner as other obligations). The FASB’s Financial Accounting Standards Advisory Council and User Advisory Council also urged the Board to address the accounting for postretirement benefits.

In November 2005, the FASB added a project to its agenda to address the employers’ accounting for pensions and other postretirement benefits. The FASB project is being conducted in phases. Completion of the first phase resulted in the issuance of Statement 158, which requires the full funded status of postretirement benefit plans to be recognized on the statement of position.

Convergence—FASB and IASB efforts

In April 2004, the FASB and the IASB identified postretirement benefits as a topic to be addressed in a future major project and agreed that the two Boards should work on that project collaboratively to develop standards of accounting that are internationally converged. The FASB Board added this topic to its agenda in November 2005 (see above) and in July 2006, the IASB added a similar project to its agenda. Like the FASB project, the IASB project is being conducted in phases.

After careful examination of the issues, as well as consideration of the best use of their respective resources, the FASB and the IASB have developed a work plan consistent with an end goal of convergence. Under the plan, each Board will initially work separately on the different but related aspects of the accounting for pensions and other postretirement benefits included in the scope of the current phase of each of the projects and assess opportunities for convergence as the work in each of the projects progresses. In each of the projects, both the FASB and the IASB are focused on creating high-quality accounting standards that address presentation and disclosure of information about pensions and other postretirement benefits that is useful to users of the financial statements.

*Contact Information

Philip R. Hood
Project Manager
prhood@fasb.org

Victoria M. McMillen
Postgraduate Technical Assistant
vmmcmillen@fasb.org