ASC 715-70
Defined Contribution Plans
715 Compensation—Retirement Benefits
Source downloaded: .Record version 1ba7a48dadbf. Effective date must be checked in the source.
ASC 715-70 governs employer accounting and disclosure for defined contribution pension and other postretirement benefit plans—plans that provide an individual account for each participant and benefits based only on contributions plus returns. The core rule is that net periodic cost equals the contribution called for in the period in which the employee renders service (715-70-35-1), with costs accrued during the service period if contributions relate to periods after retirement or termination. Plans with characteristics of both defined benefit and defined contribution plans must be accounted for based on their substance (715-70-15-2).
Key points (7)
- An employer's obligation is fully satisfied when the period's contribution is made, provided costs are not deferred and recognized after the related service period (715-70-05-2).
- Net pension or other postretirement benefit cost for a period is the contribution called for in that period; contributions called for after retirement or termination must be accrued during the employee's service period (715-70-35-1).
- If a plan has characteristics of both a defined benefit and defined contribution plan and its substance is to provide a defined benefit (e.g., some target benefit plans), account for it under Subtopic 715-30 or 715-60 and disclose per 715-20-50-1 and 715-20-50-5 (715-70-15-2).
- Employers must disclose defined contribution plan cost for all periods presented separately from defined benefit cost, plus the nature and effect of significant changes affecting comparability such as a change in contribution rate, a business combination, or a divestiture (715-70-50-1).
- A floor-offset arrangement—where account balances in a defined contribution plan reduce the employer's defined benefit obligation—is accounted for as two separate plans, not one (715-70-55-2 through 55-3).
- Assets contributed in excess of the required annual contribution and held in a suspense account pending allocation are recorded as an employer asset (the employer retains the risks and rewards), with compensation expense recognized when the plan makes the allocation, measured at fair value at that time (715-70-55-4 through 55-7).
- Unallocated employer common stock in the plan is reported as treasury stock; unallocated employer and third-party debt securities are reported as assets (not debt extinguishment) measured at the lower of cost or fair value (715-70-55-8 through 55-9).
For students. Exams love the contrast: defined contribution cost is simply the contribution owed for the period—no actuarial assumptions, no funded status on the balance sheet—whereas defined benefit accounting under 715-30/715-60 is far more complex. The classic trap is assuming a plan labeled "defined contribution" is one; substance controls (target benefit and floor-offset arrangements must be analyzed carefully, and floor-offset arrangements are two separate plans).
defined contribution plannet periodic benefit costindividual participant accountsfloor-offset plantarget benefit planunallocated suspense account assetspostretirement health care accountstreasury stock presentation
Machine-generated study aid for ASC 715-70. Check the source paragraphs below.
715-70-00Status
Source downloaded: .Record version 4e83077bcde1. Effective date must be checked in the source.
715-70-00-1
The following table identifies the changes made to this Subtopic.
| Paragraph | Action | Accounting Standards Update | Date |
| Defined Contribution Plan | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Defined Contribution Postretirement Plan | Superseded | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| Fair Value (3rd def.) | Added | Accounting Standards Update No. 2012-04 | 10/01/2012 |
| 715-70-15-2 | Added | Accounting Standards Update No. 2012-04 | 10/01/2012 |
| 715-70-35-2 | Superseded | Accounting Standards Update No. 2012-04 | 10/01/2012 |
| 715-70-50-1 | Amended | Accounting Standards Update No. 2014-06 | 03/14/2014 |
| 715-70-55-6 | Amended | Accounting Standards Update No. 2016-01 | 01/05/2016 |
| 715-70-55-7 | Amended | Accounting Standards Update No. 2012-04 | 10/01/2012 |
| 715-70-55-9 | Amended | Accounting Standards Update No. 2012-04 | 10/01/2012 |
715-70-05Overview and Background
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715-70-05-1
This Subtopic provides guidance on the accounting and reporting of defined contribution plans.
715-70-05-2
An employer's present obligation under the terms of a plan is fully satisfied when the contribution for the period is made, provided that costs (defined contributions) are not being deferred and recognized in periods after the related service period of the individual to whose account the contributions are to be made.
715-70-05-3
In a postretirement health plan, an employer may establish individual postretirement health care accounts for each employee, each year contributing a specified amount to each active employee's account. The balance in each employee's account may be used by that employee after the employee's retirement to purchase health care insurance or for other health care benefits. Rather than providing for defined health care benefits, the employer is providing a defined amount of money that may be used by retirees toward the payment of their health care costs.
715-70-15Scope and Scope Exceptions
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Overall Guidance
715-70-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 715-10-15.
Plans with Characteristics of both a Defined Contribution and a Defined Benefit Plan
715-70-15-2
A pension or other postretirement benefit plan having characteristics of both a defined benefit plan and a defined contribution plan requires careful analysis. If the substance of the plan is to provide a defined benefit, as may be the case with some target benefit plans, the accounting requirements shall be determined in accordance with the provisions of Subtopic 715-30 or 715-60 applicable to a defined benefit plan and the disclosure requirements shall be determined in accordance with the provisions of paragraphs 715-20-50-1 and 715-20-50-5.
715-70-35Subsequent Measurement
Source downloaded: .Record version 835915647fe1. Effective date must be checked in the source.
Defined Contribution Plans
715-70-35-1
To the extent a plan's defined contributions to an individual's account are to be made for periods in which that individual renders services, the net pension or other postretirement benefit cost for a period shall be the contribution called for in that period. If a plan calls for contributions for periods after an individual retires or terminates, the estimated cost shall be accrued during the employee's service period.
715-70-50Disclosure
Source downloaded: .Record version cc1e825dfeb5. Effective date must be checked in the source.
715-70-50-1
An employer shall disclose the amount of cost recognized for defined contribution pension plans and for other defined contribution postretirement benefit plans for all periods presented separately from the amount of cost recognized for defined benefit plans. The disclosures shall include a description of the nature and effect of any significant changes during the period affecting comparability, such as a change in the rate of employer contributions, a business combination, or a divestiture.
715-70-55Implementation Guidance and Illustrations
Source downloaded: .Record version 34eb6d15297d. Effective date must be checked in the source.
Implementation Guidance
715-70-55-1
This Section, which is an integral part of the requirements of this Subtopic, provides general guidance related to accounting and disclosure requirements of defined contribution pension and other postretirement benefit plans.
715-70-55-2
An employer has two legally separate pension or other postretirement benefit plans—a defined benefit plan and a defined contribution plan. The terms of the defined benefit plan specify that the employer's obligation under that plan is reduced to the extent that a participant's account balance in the defined contribution plan shall be used to pay incurred benefits covered by the defined benefit plan. Those plans shall be considered two plans for purposes of applying this Subtopic.
715-70-55-3
The defined benefit plan is commonly described as a floor-offset plan. As participants' account balances in the defined contribution plan grow, the employer's obligation under the defined benefit plan diminishes. However, the nature of the employer's obligation under each plan, how that obligation is satisfied, the availability of plan assets to pay benefits, and the accounting for a defined benefit versus a defined contribution plan are sufficiently dissimilar for the two plans that they cannot be considered a single plan for purposes of applying the guidance in this Subtopic. See paragraphs for additional guidance on floor-offset plans.
715-70-55-4
When an employer terminates a defined benefit plan and contributes the assets withdrawn to a defined contribution plan and the amount contributed is in excess of the employer's required (or maximum) annual contribution to the plan, the assets in excess of the required contribution are maintained in a suspense account pending allocation to plan participants. Those assets are not allocated to individual participants' accounts, and the employer retains the risks and rewards of ownership of the assets.
715-70-55-5
The excess contribution that is not allocated to individual participants shall be accounted for as an asset regardless of the source of funds to make the excess unallocated contribution (for example, either from an asset reversion of a defined benefit plan or otherwise).
715-70-55-6
The unallocated amount shall be treated as if it were part of the employer's investment portfolio and recorded as an asset until allocation to individual participants. For example, if the unallocated amount consists of equity securities, the accounting as required by Subtopic 321-10 shall apply. If the employer is subject to specialized industry accounting rules, as indicated in paragraph 320-10-15-3 or paragraph 321-10-15-3, such specialized industry rules would apply. Income attributable to such securities, including dividends, interest, and realized gains and losses, should be reported in a manner consistent with the employer's reporting of similar items.
715-70-55-7
Compensation expense shall be reflected at the time the allocation is made by the plan based on the fair value of the assets at that time.
715-70-55-8
The employer shall report the portion of the unallocated assets of the plan that consist of employer common stock as treasury stock in the employer's financial statements.
715-70-55-9
With respect to the employer's own debt securities and a third party's debt securities the employer shall report the portion of the unallocated assets of the plan that consist of employer debt securities as an asset rather than as an extinguishment of debt. This Subtopic applies only to employer debt securities included in the unallocated assets of a defined contribution plan and shall not apply to other circumstances in which an entity acquires its own debt securities. Debt securities, both of third parties and of the employer, included in the unallocated assets of a defined contribution plan shall be measured at the lower of cost or fair value with any write-downs reflected in the income statement.
Related subtopics
- 715-80 Multiemployer PlansCompensation—Retirement Benefits
- 715-60 Defined Benefit Plans—Other PostretirementCompensation—Retirement Benefits
- 715-10 OverallCompensation—Retirement Benefits
- 960-30 Net Assets Available for Plan BenefitsPlan Accounting—Defined Benefit Pension Plans
- 962-10 OverallPlan Accounting—Defined Contribution Pension Plans
- 715-20 Defined Benefit Plans—GeneralCompensation—Retirement Benefits