The Financial Accounting Standards Board has beefed up its standards for multiple-employer pension plans, requiring employers to provide more information about their pension plan obligations, particularly for unionized employees.

Leslie Seidman

Multiemployer pension plans are mainly used to provide post-retirement benefits to union employees, who typically work for different employers over the years but accrue benefits in a single plan.

“Historically, very limited information about these plans has been disclosed, even though they may represent significant potential obligations for many large, unionized industries such as trucking, supermarket chains and construction firms,” said FASB chair Leslie F. Seidman in a statement. “The enhanced disclosures will ensure that shareholders in companies that participate in these plans, workers who depend on them for their retirement benefits, as well as lenders and others, will have more information regarding the employers’ pension commitments and the financial health of the plans.”

Prior to FASB’s approval Wednesday of the revised standards, employers only needed to disclose their total contributions to all of the multiemployer plans in which they participated.

The new disclosures will include the amount of employer contributions made to each significant plan and to all plans in the aggregate; along with an indication of whether the employer’s contributions represent more than 5 percent of the total contributions to the plan; an indication of which plans, if any, are subject to a funding improvement plan; and the expiration dates of any collective bargaining agreements and any minimum funding arrangements.

Another new disclosure involves the most recent certified funded status of the plan, as determined by the plan’s so-called “zone status,” which is required by the Pension Protection Act of 2006. If the “zone status” is not available, an employer will be required to disclose whether the plan is either less than 65 percent funded, between 65 percent and 80 percent funded, or greater than 80 percent funded. Employers must also provide a description of the nature and effect of any changes that have an impact on the comparability of each period in which a statement of income is presented.

FASB initially proposed changing the disclosures last September and received comments from many people who told the board that the withdrawal liability proposed by the board would not be an appropriate proxy for an employer’s proportional share of the underfunded status of the plan. They suggested instead that the employer’s share of the underfunded status of the plan could only be determined through the collective bargaining process.

Commentators also urged FASB not to require a “point-in-time” estimate of an employer’s obligations with respect to underfunding. In response, FASB decided to delete its original proposal to require employers to disclose their withdrawal liability to all plans in which they participate, or provide a “point-in-time” estimate of its obligations with respect to the underfunded status of individual plans.

FASB said it expects that the revisions approved Wednesday will be finalized in September 2011. For public entities, the enhanced disclosures will be required in fiscal years ending after Dec. 15, 2011. For nonpublic entities, the enhanced disclosures will be required in fiscal years ending after Dec. 15, 2012.