The following table identifies the changes made to this Subtopic.
This Subtopic provides guidance on the accounting and reporting of
defined contribution plans.
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.
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.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
715-10-15.
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.
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.
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.
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.
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).
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.
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.