New FASB Standard Impacts Master Trust Investments

March 2, 2017

Updates have been issued regarding the Financial Accounting Standards Board’s (“FASB”) master trust investments guidance. The amendments in 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, primarily deal with an employee benefit plan reporting its interest in a master trust.

The amendments address diversity in practice regarding the presentation of master trust investments in the statement of net assets available for benefits. For every master trust wherein an employee benefit plan holds an interest, the interest in that master trust and any change in that interest must be disclosed in separate line items under the statement of net assets available for benefits. It must also be disclosed in the statement of changes in net assets available for benefits.

In addition, the FASB has eliminated the requirement under Topics 960 and 962 to report the percentage interest in the master trust for plans with divided interests. In its place, all plans will be required to report the dollar sum of their interest in each investment.

Also addressed in the final standard is the redundancy in investment disclosures concerning 401(h) account assets for defined benefit pension plan and health and welfare benefit plan financial statements. The FASB streamlined this issue by no longer requiring 401(h) account assets to be disclosed in a health and welfare benefit plan’s financial statements. Rather, health and welfare benefit plans must disclose the defined benefit pension plan wherein such investment disclosures are provided. This gives participants better access to information on the 401(h) account assets, if necessary.

ASU No. 2017-06 is effective for fiscal years starting after December 15, 2018, and early adoption will be permitted. Entities within the scope of Topics 960, 962 and 965 should apply the new guidance retrospectively to every period financial statements are presented.