FASB Proposes to Simplify Employee
Benefit Plan Accounting
The Financial Accounting Standards Board (FASB) has proposed several ways to simplify certain aspects of
employee benefit plan (EBP) accounting. The exposure draft, issued April 23, 2015, contains three proposed
Accounting Standards Updates (ASU) and would amend accounting for defined benefit pension plans (Topic 960),
defined contribution pension plans (Topic 962) and health and welfare benefit plans (Topic 965). A short comment
period of 25 days—ending May 18—could mean a final standard and reduced requirements for 2015 EBP financial
statements. The effective date will be determined after FASB’s Emerging Issues Task Force considers stakeholder
feedback on the proposed updates.
The first ASU, Fully Benefit-Responsive Investment Contracts, proposes that plans measure, present and disclose
fully benefit-responsive investment contracts (FBRICs) only at contract value. FASB proposes eliminating the
requirement to reconcile the contract amount to fair value on the face of the financial statements, as well as
current disclosure requirements relating to fair value disclosures in Topic 825. EBPs would continue to provide
disclosures that help users understand the nature and risks of the FBRICs, including a description of the events that
would cause the plan to transact at an amount different from contract value. The update also would eliminate
certain disclosures required under plan accounting requirements for FBRICs.
The second ASU, Plan Investment Disclosures, proposes disaggregation (grouping & disclosure) of plan investments
based on general type only, either on the face of the financial statements or in the notes to the financial
statements. This eliminates the requirement to disaggregate by nature, characteristics and risks (by class). EBPs
would present self-directed brokerage accounts as one general type of investment in the statement of net assets
available for benefits or in the notes to the financial statements. If an EBP measures an investment at net asset
value, or its equivalent, using the practical expedient in Topic 820, and that investment is in a fund that files Form
5500 as a direct-filing entity, disclosure of that investment’s strategy no longer would be required.
The updates would eliminate or reduce several current plan accounting requirements, including:

Eliminate the plan accounting requirement to disclose individual investments that represent 5 percent or
more of net assets available for benefits

Replace the plan accounting requirement to disclose net appreciation or depreciation in fair value of
investments by general type—applicable to both participant-directed and nonparticipant-directed
investments—with a requirement to disclose the amount in the aggregate
The third ASU, Measurement Date Practical Expedient, proposes a practical expedient to permit plans to measure
investments and investment-related accounts as of a month-end date closest to the plan’s fiscal year-end, when
the fiscal year-end does not coincide with month-end. This proposal aligns with ASU 2015-04 Compensation—
Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit
Obligation and Plan Assets, which allows employers to measure defined benefit plan assets and obligations as of a
month-end date that is closest to the plan’s fiscal year-end, when the fiscal period does not coincide with monthend.
If a plan applies the practical expedient and there are contributions, distributions or significant events that occur
between the alternative measurement date and the plan’s fiscal year-end, the plan would be required to disclose
the amounts and financial effects of such items. The plan also would be required to disclose the accounting policy
election, the alternative measurement date and investment-related accounts.
FASB Proposes to Simplify Employee Benefit Plan Accounting
FASB proposes entities apply the amendments on the measurement of FBRICs and plan investment disclosures
retrospectively to all periods presented beginning in a plan’s fiscal year of adoption. The proposed measurement
practical expedient would be applied prospectively.
For more information, contact your BKD advisor.
Contributor
Connie Spinelli
Director
303.861.4545
[email protected]
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