The Financial accounting Standards Board recently approved a revised accounting standard that requires contributing non-governmental employers to provide more information about their financial obligations to multi-employer pension plans.

It should be noted that the amendments in Accounting Standards Update No. 2011-09 only apply to multi-employer plans that are defined-benefit plans covering the union employees for more than one employer. Defined-contribution plans, single-employer and non-union plans are not covered.

Employers generally contribute to multi-employer plans according to contractually negotiated rates and, historically, could become liable for "withdrawal liability" upon a cessation of contributions to an underfunded plan. Under the Pension Protection Act of 2006, contributing employers may also become liable for increased contributions under a "funding improvement" or "rehabilitation plan."

Under previous FASB rules, an employer's disclosure was limited to its historical contributions to the multi-employer plan in which it participates. FASB's objective in issuing the update was to give financial statement readers a more accurate picture of an employer's potential cash flow obligations, particularly concerning the possible withdrawal liability and funding improvement obligations arising in financially troubled plans.

FASB's initial draft of the guidance included a requirement to include a point-in-time estimate of an employer's withdrawal liability during the period of the financial statement. However, in public hearings, many negative comments surfaced regarding that proposal. Many of those who commented told the board that the withdrawal liability would not be an appropriate proxy for an employer's withdrawal liability or contribution obligations to the plan. Commentators also pointed out that such point-in-time estimates are difficult and time-consuming to obtain, almost always requiring cooperation from the plan.

In the final version, FASB substituted a more meaningful set of requirements, requiring disclosure of the following:

Identification of the significant multi-employer plans in which the employer participates by name and employer ID number.

The level of participation in the significant plans, including an indication of whether the employer's contributions represent more than 5 percent of total plan contributions.

An indication of which plans, if any, are subject to a funding improvement plan.

The expiration dates of any collective bargaining agreements and whether such agreements require minimum contributions.

A qualitative description that helps investors understand the significance of the collective bargaining agreements, such as the portion of the employees covered.

The financial health of the plan, including the most recent certified funded "zone" status of the plan. If the "zone status" is not available, an employer will be required to disclose whether the plan is less than 65 percent funded; between 65 percent and 80 percent funded; or greater than 80 percent funded.

A description of the nature and impact of any changes affecting comparability for each period in which a statement of income is presented.

It is anticipated that the financial statements about the plans will be accessible from publicly available Forms 5500. The following additional disclosure regarding plan benefits and employer financial obligations is required for plans where such information is not available:

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