# ASC 205-965-05: Presentation of Financial Statements — Plan Accounting—Health and Welfare Benefit Plans — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/205/965/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T22:57:38.913Z to 2026-09-09T22:57:38.913Z Record version: sha256:abf9375d623a29f65b8fdb1de9ba1477c762202262a03cb56a8b06093637631b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 205-965-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/205/965/#05-overview-and-background) SEC content: no ##### [205-965-05-1](https://asc.understandingaccounting.org/asc/205/965/#205-965-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T22:57:38.913Z to 2026-09-09T22:57:38.913Z Record version: sha256:ad1876cb50fbbcca2e2aaae0ece9763fc75afb35ecd3dd9363aa8420315bd427 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on the presentation of financial statements for [health and welfare benefit plans](https://asc.understandingaccounting.org/glossary/h/#health-and-welfare-benefit-plans "Health and welfare benefit plans include plans that provide the following: Any of the following benefits: Medical, dental, visual, psychiatric, or long-term health care Life insurance (offered separately from a pension plan) Certain severance benefits Accidental death or dismemberment benefits. Benefits for unemployment, disability, vacations, or holidays Other benefits such as apprenticeships, tuition assistance, day care, dependent care, housing subsidies, or legal services."). #### 401(h) Accounts ##### [205-965-05-2](https://asc.understandingaccounting.org/asc/205/965/#205-965-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T22:57:38.913Z to 2026-09-09T22:57:38.913Z Record version: sha256:9953fb66f2be529abb9fc8c4aa763fdbcd27c0c4dff6f3e1374830a2432350a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Employers may fund a portion of their postretirement medical-benefit obligations related to their health and welfare benefit plans through a health benefit account ([401(h) account](https://asc.understandingaccounting.org/glossary/h/#401-h-accounts "A postretirement medical-benefit component provided in some defined benefit pension plans in addition to the normal retirement benefits of the plan, pursuant to Section 401(h) of the Internal Revenue Code.")) in their defined benefit pension plans, subject to certain restrictions and limitations. ##### [205-965-05-3](https://asc.understandingaccounting.org/asc/205/965/#205-965-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T22:57:38.913Z to 2026-09-09T22:57:38.913Z Record version: sha256:d8a592f7b8309e9cbb2a4d0d5fbbdf3e1972ac9807eca1ebd309bbadd9aeaa8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Funding can be accomplished through a qualified transfer of excess pension plan assets (as defined in Section 420 of the Internal Revenue Code) or through additional contributions to the 401(h) account by the employer, employees, or both. Any assets transferred to a 401(h) account in a qualified transfer of excess pension plan assets (and any income allocable thereto) must be used only to pay qualified current retiree health benefits for the taxable year of the transfer (whether directly or through reimbursement). Any assets transferred to the 401(h) account to pay retiree medical expenses in a qualified transfer of excess pension plan assets (and any income allocable thereto) that are not used during the year must be transferred out of the account to the transferor plan and treated as an employer reversion for purposes of a 20 percent excise tax on reversions. The Internal Revenue Code allows employers to allocate up to 25 percent of total contributions to the plan, subject to certain limitations, to the 401(h) account. If the full amount of these contributions is not used during the year, they may be accumulated for future retiree medical expenses in the 401(h) account. The deductibility of employer contributions to a 401(h) account is subject to separate limitations and, therefore, such contributions have no effect on the amount of deductible contributions an employer can make to fund pension benefits under the plan. The earnings on the 401(h) account are ignored for minimum funding purposes. Additionally, under the Code, qualified transfers are not treated as prohibited transactions for purposes of Section 4975. ##### [205-965-05-4](https://asc.understandingaccounting.org/asc/205/965/#205-965-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T22:57:38.913Z to 2026-09-09T22:57:38.913Z Record version: sha256:625e14e006b0a9a952bfe9f78d2529307acf7ef412592f7520904da2c53437c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The plan sponsor has discretion in making contributions to the 401(h) account. A pension or annuity plan may provide for payment of medical benefits for retired employees, their spouses, and their dependents if all of the following conditions are met: 1. a Benefits are subordinate (as defined in Section 401(h) of the Internal Revenue Code) to the retirement benefits provided by the plan. 2. b A separate account is established and maintained for such benefits. 3. c The employer's contributions to the separate account are reasonable and ascertainable. 4. d It is impossible, at any time before the satisfaction of all obligations under the plan to provide such benefits, for any part of the corpus or income of the separate account to be (within the taxable year or thereafter) used for or diverted to any purpose other than the providing of such benefits. 5. e Notwithstanding the provisions of certain Internal Revenue Code sections, upon satisfaction of all obligations under the plan to provide such benefits, any amount remaining in the separate account must, under the terms of the plan, be returned to the employer. 6. f In the case of an employee who is a key employee (as defined in Section 416(i)), a separate account is established and maintained for such benefits payable to such employee (and the spouse and dependents) and such benefits (to the extent attributable to plan years beginning after March 31, 1984, for which the employee is a key employee) are payable only to such employee (and the spouse and dependents) from that separate account. ##### [205-965-05-5](https://asc.understandingaccounting.org/asc/205/965/#205-965-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T22:57:38.913Z to 2026-09-09T22:57:38.913Z Record version: sha256:078523c5c504a0a8f5f1bce24cb33e76191da64647df646ebc8f57795ace0c7e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The 401(h) assets may be used only to pay current retiree health benefits, which are obligations of a separate health and welfare benefit plan or health benefit arrangement. They may not be used to satisfy pension obligations. Although the assets may be invested together with assets that are available to pay pension benefits, a separate accounting must be maintained for all qualified transfers, contributions, distributions, expenses, and income earned thereon.