FASB Project Updates

At the November 11, 2003 meeting, the Board made the following decisions regarding additional pension and other postretirement benefit disclosures:

1. The following disclosures would be required as proposed in the Exposure Draft, Employersf Disclosures about Pensions and Other Postretirement Benefits, dated September 12, 2003:
   1. The accumulated benefit obligation (ABO).

   2. The use of a tabular format for disclosure of the following key assumptions:

      (1)  The assumed discount rates

      (2)  Rates of compensation increase (for pay-related plans)

      (3)  Expected long-term rates of return on plan assets.

   3. Information about each major category (equity, debt, real estate, other) of plan assets:

      (1)  Percentage of the fair value of total plan assets as of the measurement date used for each statement of financial position presented

      (2)  Target allocation percentage or range of percentages, presented on a weighted-average basis. For sponsors that do not have investment targets by major category, a statement to that effect

      (3)  A narrative description of investment strategies.

   4. Interim disclosure of the following:

      (1)  The components of net periodic benefit cost

      (2)  An update of the employerfs expected contributions to be paid during the year, if that expectation changed significantly from the previous annual or interim period disclosure amount.

2. The following disclosures would be required; their provisions have changed from those proposed in the Exposure Draft:
   1. A narrative description of the basis for determining the overall expected long-term rate of return. [The requirement to disclose the expected rate of return by individual asset category has been eliminated].

   2. In all cases, measurement dates used for plans that make up the majority of a sponsorfs plan assets and benefit obligations. [The requirement that disclosure of measurement dates be conditioned upon the occurrence of significant economic events has been eliminated and makes their disclosure required in all circumstances, for all sponsors].

   3. Reconciliations of beginning and ending balances of the fair value of plan assets and benefit obligations. [This reinstates the reconciliations as required by FASB Statement No. 132, Employersf Disclosures about Pensions and Other Postretirement Benefits].

   4. The employerfs best estimate, once known, of its contributions to be paid to fund the plan for the next fiscal year beginning after the date of the latest statement of financial position. Amounts would be presented in the aggregate, considering all estimated contributions, such as contributions required by funding regulations or laws and additional discretionary contributions. [This eliminates the requirement to disclose required, discretionary, and noncash contributions separately and adds the language gbest estimate, once knownh].

   5. The projected/expected benefit payments, including employeesf future service, for each of the next five years and thereafter, with a reconciliation back to the projected benefit obligation that would reflect interest, future service accruals, and participant contributions.* [This replaces disclosure of benefit payments used in determining the projected benefit obligation which do not consider future service].

3. The Board reaffirmed that all requirements will be applied to nonpublic entities, except for exemptions carried forward from Statement 132 and for the interim period disclosure of the components of net periodic benefit cost.

4. The following information would not be required:
   1. Sensitivity information

   2. Other provisions identified in Issue 9 of the Exposure Draft

   3. Debt maturity information

   4. Expected long-term rate of return for individual asset categories of plan assets.

5. The effective date of this Statement, for other than nonpublic entities, would be for fiscal years ending after December 15, 2003, for all disclosures except the following, which would be effective for fiscal years ending after June 15, 2004:
   1. Any new disclosures, not previously required by Statement 132, about foreign plans

   2. The projected value of all benefit payments.

   The Board is evaluating further whether to require information about plan assets in financial statements for years ending after December 15, 2003, but has not finalized that decision yet.

   The effective date of this Statement for nonpublic entities would be for fiscal years ending after June 15, 2004.

*This disclosure is subject to reconsideration.

Immediate Plans

The FASB has completed and issued an Exposure Draft, Employersf Disclosures about Pensions and Other Postretirement Benefits, and has analyzed the related comment letters received. At its meeting on November 11, 2003, the Board redeliberated several issues based on those comment letters and directed the staff to begin drafting the final Statement. Links to the Exposure Draft, comment letters, comment letter analysis, and Frequently Asked Questions appear below.

Summary of Tentative Decisions

The Board has agreed upon the following disclosures in addition to those required by FASB Statement No. 132, Employersf Disclosures about Pensions and Other Postretirement Benefits:

Plan Assets

• Major categories of assets (equity securities, debt securities, real estate, other)
  • Percentage of total plan assets for each period in which a statement of financial position is presented
  • Target allocation percentage(s) (for sponsors that do not have investment targets by major category, a statement to that effect) and a description of investment strategies and policies employed
• Encourage further breakdowns if useful to understand market risks and expected long-term rate of return.
• A description of the basis used to select the expected long-term rate of return on assets assumption

Obligations

• Accumulated benefit obligation (only applicable to pensions)
• Expected future benefit payments (each of next five years and thereafter-less total interest and future service components to derive projected benefit obligation)
• Best estimate of aggregate expected contributions to fund the plan for the next fiscal year

Other

• Reconciliations of beginning and ending balances of the fair value of plan assets and benefit obligations (as presently required by Statement 132)
• Assumptions, disclose in tabular format. One table for assumptions used to determine the benefit obligation and another table for assumptions used to determine net periodic cost.
• Measurement date, or dates, used for the majority of plans

Interim Period Disclosure

• Net pension cost
  • Elements of net pension cost (service, interest, expected investment return, etc.).
  • Update for significant changes in previously disclosed projected contributions

The Board has also retained all other disclosures required by Statement 132.

Board Meeting/Public Meeting Dates

Related FASB Articles

History and Background

The Board has received several direct requests from constituents asking it to consider changing the accounting and disclosures regarding pensions. There also have been numerous published articles and reports expressing concern about certain inadequacies of pension accounting and reporting. Most of these concerns are about the lack of transparency that results from delayed recognition for investment returns, the cost of plan amendments, and actuarial gains and losses. In addition, analysts and investors want more information regarding the portfolio of plan assets, future outflows for benefit payments, and contributions to the pension fund. These concerns have been heightened by the decline in equity markets, the exposure of plan assets to further risk, and the need for more information about cash outflows to fund plan commitments. In response to the concerns raised by analysts and investors, the Board decided to add a limited scope project to its technical agenda to improve disclosures relating to employersf accounting for pension plans. This project will consider requests for improved disclosures related to pension costs, plan assets, obligations, and funding requirements.

Contact Information