FASB, Financial Accounting Standards Board.

Phase II: Postretirement Benefit Obligations, Including Pensions

Project Summary

Last Updated: April 4, 2013 (Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Objectives

The objective of this project is to comprehensively reconsider employers’ accounting for pensions and other postretirement benefits in FASB Statements No. 87, Employers’ Accounting for Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to improve the quality of the information provided to investors, creditors, employees, retirees, donors, and other users of the financial statements. The project is being conducted in phases with an end goal of convergence.

Due Process Documents

In September 2006, the Board issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans. In February 2007, the Board issued FASB Staff Position FAS 158-1, Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides. FSP 158-1 updates the illustrations in those documents to reflect the provisions of Statement 158. With the issuance of Statement 158 and the FSP, the Board completed phase 1 of this project. The proposed FSP to amend Statement 132(R) was exposed on March 18, 2008, with a 45-day comment period ending May 2, 2008.

In December 2008, the Board issued FSP FAS 132(R)-1, Employers’ Disclosures About Postretirement Benefit Plan Assets. FSP FAS 132(R)-1 provides guidance on an employers’ disclosures about plan assets of a defined benefit pension or other postretirement benefit plan.

FAS 158

FSP FAS 158-1

FSP FAS 132(R)-1

Decisions Reached at the Last Meeting

See FSP FAS 132(R)-1.

Summary of Decisions Reached to Date

The FASB completed FSP FAS 132(R)-1, which addresses disclosures about postretirement benefit plan assets. 

*Next Steps

The FASB will hold education sessions to consider the next steps of the project.

Board Meeting and Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final Statement, Interpretation, or FSP.

The following are links to minutes for each meeting.

Below is a list of the FASB Board/Public meetings. Minutes for meetings generally are posted within two weeks following the meeting.

History and Background

Disclosure—Statement 132(R)

In 2003, the FASB issued Statement 132(R), which addressed concerns about the need for enhanced disclosures for plan assets, cash flows for benefit payments and contributions, and components of net benefit cost reported in interim periods. Statement 132(R) did not, however, address other related concerns, including the following:

• Delayed recognition 
  • Expected long-term return on plan assets
  • Actuarial gain and losses amortized subject to 10 percent corridor
  • Calculated value of assets for expected return on assets and 10 percent corridor
  • Prior service costs amortized over active service period 
• Combining of service cost, asset returns, and financing costs
• Insufficient information about cash flows
• Measurement of the liability 
  • Projected benefit obligation versus accumulated benefit obligation versus termination liability
  • Cash balance plans and plans with lump-sum benefits
  • Discount rate(s) to use
• Assumptions Requirements 
  • Discount rate and expected rate of return on assets
• Contributions-based accounting for an employer’s participation in a multiemployer plan
• Insufficient and overly complex disclosures

In 2005, the SEC staff issued its Report and Recommendations Pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 on Arrangements with Off-Balance Sheet Implications, Special Purpose Entities, and Transparency of Filings by Issuers. In that Report, the SEC staff identified defined benefit pension plan accounting as one of the topics that should be added to the Board’s technical agenda and recommended that it be addressed jointly with the IASB. The SEC staff concluded that reconsidering the accounting for defined benefit pension plans is necessary to improve the quality and transparency of financial statements and to eliminate inconsistent accounting treatment for pensions (for example, changes in estimates of benefit obligations are not treated in the same manner as other obligations). The FASB’s Financial Accounting Standards Advisory Council and User Advisory Council also urged the Board to address the accounting for postretirement benefits.

In November 2005, the FASB added a project to its agenda to address the employers’ accounting for pensions and other postretirement benefits. The FASB project is being conducted in phases. Completion of the first phase resulted in the issuance of Statement 158, which requires the full funded status of postretirement benefit plans to be recognized on the statement of position.

Convergence—FASB and IASB efforts

In April 2004, the FASB and the IASB identified postretirement benefits as a topic to be addressed in a future major project and agreed that the two Boards should work on that project collaboratively to develop standards of accounting that are internationally converged. The FASB Board added this topic to its agenda in November 2005 (see above) and in July 2006, the IASB added a similar project to its agenda. Like the FASB project, the IASB project is being conducted in phases.

After careful examination of the issues, as well as consideration of the best use of their respective resources, the FASB and the IASB have developed a work plan consistent with an end goal of convergence. Under the plan, each Board will initially work separately on the different but related aspects of the accounting for pensions and other postretirement benefits included in the scope of the current phase of each of the projects and assess opportunities for convergence as the work in each of the projects progresses. In each of the projects, both the FASB and the IASB are focused on creating high-quality accounting standards that address presentation and disclosure of information about pensions and other postretirement benefits that is useful to users of the financial statements.

Contact Information

Philip R. Hood
Project Manager
prhood@fasb.org