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Changes Finalized for Reporting Employee Benefit Plan Interests in Master Trusts

April 4, 2017

On Feb. 27, 2017, the Financial Accounting Standards Board (FASB) issued accounting standards update (ASU) 2017-06 for employee benefit plans that hold interests in master trusts. ASU 2017-06 is effective for defined benefit pension plans, defined contribution plans and health and welfare benefit plans with interests in master trusts effective for fiscal years beginning after Dec. 15, 2018, and needs to be applied retrospectively.

The following provides an overview of the major changes.

Presentation of Investments in Master Trusts

ASU 2017-06 addresses diversity in practice in how plans present their investments in master trusts. Under current U.S. generally accepted accounting principles (GAAP), defined benefit pension plans present investments in master trusts as a single line item. Presentation guidance did not previously exist for defined contribution pension plans or health and welfare plans.

Under the new guidance, interests in master trusts are shown in a plan's statement of net assets and statement of changes in net assets as single line items for each interest in a master trust.

Master Trust Assets and Liabilities

Defined benefit pension plans and defined contribution plans currently disclose within their financial statements their percentage interest in master trusts. They also list the investments held by the master trust by type.

ASU 2017-06 removes the requirement to disclose percentage interests in master trusts for plans with divided interests. In addition, the ASU requires that all plans disclose the dollar amount of their interest in each of the general types of investments, which supplements the existing requirement to disclose the master trust's balances in each general type of investments.

Other Assets and Liabilities Disclosure

Currently, defined benefit pension plans, defined contribution plans and health and welfare benefit plans do not disclose amounts due from brokers for securities sold, amounts due to brokers for securities purchased, accrued interest and dividends and accrued expenses. The new guidance requires all plans to disclose their master trust's other asset and liability balances and the dollar amount of the plan's interest in each of those balances.

Health and Welfare Plan Disclosures

Disclosures about retiree medical expense accounts (401(h) assets) are generally required for both health and welfare plans and defined benefit pension plans. To simplify reporting, the ASU removes the requirement for health and welfare plans to disclose 401(h) account assets. Instead, health and welfare plans will disclose the name of the defined benefit pension plan where the 401(h) information can be found.

Adopting the Standard

All plans must adopt the standard for fiscal years beginning after Dec. 15, 2018 (the 2019 calendar year), for all periods presented in the financial statement and early adoption is permitted. For more information about the changes, please contact Hal Hunt of MHM's Professional Standards Group. Hal can be reached at hhunt@cbiz.com or 816.945.5610.

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