ASC

ASC 715-80

Multiemployer Plans

715 Compensation—Retirement Benefits

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In brief

IntermediateCompensation and benefitsDisclosureRecognitionContingencies and guarantees

ASC 715-80 governs an employer's accounting and disclosure for participation in multiemployer pension and other postretirement benefit plans — plans to which two or more unrelated employers contribute, usually under collective-bargaining agreements. The core rule is defined-contribution-like: the employer recognizes as net pension (or net periodic postretirement benefit) cost the required contribution for the period, including cash and the fair value of noncash contributions, and recognizes a liability only for unpaid required contributions (715-80-35-1). Extensive plan-by-plan disclosures (zone status, EIN, contributions, collective-bargaining agreement expirations, withdrawal exposure) are required so users can assess the distinctive risks of multiemployer participation.

Key points (7)
  • An employer recognizes as net pension cost or net periodic postretirement benefit cost the required contribution for the period (cash plus fair value of noncash contributions) and records a liability for any unpaid required contributions (715-80-35-1); an executed agreement to make future contributions does not create a liability beyond contributions currently due and unpaid (715-80-55-2).
  • If withdrawal from the plan under circumstances giving rise to an obligation, or an increased contribution under a maintenance of benefits clause, is probable or reasonably possible, Topic 450 contingency accounting applies (715-80-35-2; 715-80-50-2).
  • The Subtopic applies to all multiemployer pension and OPEB plans but not to multiple-employer plans, which are in substance aggregations of single-employer plans pooled for investment or administrative efficiency and ordinarily do not involve collective bargaining (715-80-15-2 through 15-3).
  • For each individually significant multiemployer pension plan, an employer must disclose (in tabular format when feasible) the plan's legal name, EIN/plan number, most recently available PPA certified zone status (or funded-percentage ranges of <65%, 65–80%, at least 80%), collective-bargaining agreement expiration dates, contributions made, whether contributions exceed 5 percent of total plan contributions per Form 5500, and whether a funding improvement or rehabilitation plan is pending or implemented, whether a surcharge was paid, and any required minimum future contributions (715-80-50-5).
  • An employer must give a narrative description of the plans and its participation showing how the risks differ from single-employer plans (715-80-50-4), describe changes affecting period-to-period comparability such as business combinations, divestitures, rate changes, or changes in covered employees (715-80-50-6), and disclose in tabular form total contributions to plans that are not individually significant and total contributions to all plans (715-80-50-9).
  • When plan-level information is not publicly available, additional disclosures about the nature of benefits, the extent of the employer's potential responsibility for plan obligations, and available quantitative plan data are required; certain quantitative items may be omitted if they cannot be obtained without undue cost and effort, with an explanation of what was omitted and why (715-80-50-7 through 50-8).
  • A multiemployer plan cannot be a substantially equivalent successor plan for a terminated single-employer defined benefit plan, so prior service cost in accumulated other comprehensive income must be recognized on an accelerated basis (715-80-55-3 through 55-4); an arrangement in which retirees lose plan coverage when the former employer stops contributing is not a multiemployer plan (715-80-55-5).

For students. The key exam trap is assuming multiemployer plan participation requires defined benefit accounting: it does not — expense equals the required contribution, and no unfunded benefit obligation is recorded unless withdrawal liability becomes probable or reasonably possible under Topic 450. Also distinguish a true multiemployer plan (obligation to retirees survives an employer's withdrawal) from a multiple-employer plan, which is accounted for as an aggregation of single-employer plans.

multiemployer planrequired contributionwithdrawal liabilitypension protection act zone statuscollective-bargaining agreementmultiple-employer planfunding improvement or rehabilitation plansuccessor plan

Machine-generated study aid for ASC 715-80. Check the source paragraphs below.

715-80-00Status

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715-80-05Overview and Background

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715-80-05-1
This Subtopic provides guidance on the accounting and reporting of multiemployer pension and other postretirement benefit plans. For purposes of this Subtopic, a multiemployer plan is a pension plan or other postretirement benefit plan to which two or more unrelated employers contribute, usually pursuant to one or more collective-bargaining agreements.
715-80-05-2
In a multiemployer setting, eligibility for benefits is defined by the plan; retired employees continue to receive benefits whether or not their former employers continue to contribute to the plan.
715-80-05-3
However, in a multiemployer postretirement benefit plan, plan participants not yet eligible for benefits may lose accumulated postretirement benefits if their current or former employer withdraws from a plan unless they take or have a job with other employers who participate in the plan.
715-80-05-4
While the postretirement benefit plan may have the option of canceling the accrued service credits that apply toward the required service, within the bargaining unit, of plan participants who were employed by a withdrawing employer and who become or are employed by another participating employer, that rarely occurs because of the difficulty of matching employees to specific employers. For example, in certain industries, an employee may work for more than one employer in a single day and different employers on different days, making it difficult to associate any portion of that employee's past service with a specific employer.

715-80-15Scope and Scope Exceptions

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Overall Guidance

715-80-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 715-10-15, with specific exceptions and qualifications noted below.

Transactions

715-80-15-2
The guidance in this Subtopic applies to all multiemployer pension or other postretirement benefit plans.
715-80-15-3
The guidance in this Subtopic does not apply to multiple-employer plans - as distinguished from multiemployer plans. Multiple-employer plans are in substance aggregations of single-employer plans, combined to allow participating employers to pool plan assets for investment purposes or to reduce the costs of plan administration. Those plans ordinarily do not involve collective-bargaining agreements. They may also have features that allow participating employers to have different benefit formulas, with the employer's contributions to the plan based on the benefit formula selected by the employer.

715-80-35Subsequent Measurement

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715-80-35-1
An employer participating in a multiemployer plan shall recognize as net pension cost or net periodic postretirement benefit cost the required contribution for the period, which shall include both cash and the fair value of noncash contributions, and shall recognize as a liability any unpaid contributions required for the period.
715-80-35-2
In some situations, withdrawal from a multiemployer plan may result in an employer having an obligation to the plan for a portion of the unfunded benefit obligation of the pension or other postretirement benefit plans. If withdrawal under circumstances that would give rise to an obligation is either probable or reasonably possible, the provisions of Topic 450 shall apply.

715-80-50Disclosure

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715-80-50-2
An employer shall apply the provisions of Topic 450 to its participation in a multiemployer plan if it is either probable or reasonably possible that either of the following would occur:
  1. a
    An employer would withdraw from the plan under circumstances that would give rise to an obligation.
  2. b
    An employer's contribution to the fund would be increased during the remainder of the contract period to make up a shortfall in the funds necessary to maintain the negotiated level of benefit coverage (a maintenance of benefits clause).

Multiemployer Plans That Provide Pension Benefits

715-80-50-3
An employer shall provide the disclosures required by paragraphs
715-80-50-4 through 50-10
in annual financial statements. The disclosures of the employer's contributions made to the plan in paragraphs 715-80-50-4 through 50-10 include all items recognized as net pension costs (see paragraph 715-80-35-1). The disclosures based on the most recently available information shall be the most recently available through the date at which the employer has evaluated subsequent events.
715-80-50-4
An employer that participates in a multiemployer plan that provides pension benefits shall provide a narrative description both of the general nature of the multiemployer plans that provide pension benefits and of the employer's participation in the plans that would indicate how the risks of participating in these plans are different from single-employer plans.
715-80-50-5
When feasible, the information required by this paragraph shall be provided in a tabular format. Information that requires greater narrative description may be provided outside the table. For each individually significant multiemployer plan that provides pension benefits, an employer shall disclose the following:
  1. a
    Legal name of the plan.
  2. b
    The plan's Employer Identification Number and, if available, its plan number.
  3. c
    For each statement of financial position presented, the most recently available certified zone status provided by the plan, as currently defined by the Pension Protection Act of 2006 or a subsequent amendment of that Act. The disclosure shall specify the date of the plan's year-end to which the zone status relates and whether the plan has utilized any extended amortization provisions that affect the calculation of the zone status. If the zone status is not available, an employer shall disclose, as of the most recent date available, on the basis of the financial statements provided by the plan, the total plan assets and accumulated benefit obligations, whether the plan was:
    1. 1
      Less than 65 percent funded
    2. 2
      Between 65 percent and 80 percent funded
    3. 3
      At least 80 percent funded.
  4. d
    The expiration date(s) of the collective-bargaining agreement(s) requiring contributions to the plan, if any. If more than one collective-bargaining agreement applies to the plan, the employer shall provide a range of the expiration dates of those agreements, supplemented with a qualitative description that identifies the significant collective-bargaining agreements within that range as well as other information to help investors understand the significance of the collective-bargaining agreements and when they expire (for example, the portion of employees covered by each agreement or the portion of contributions required by each agreement).
  5. e
    For each period that a statement of income (statement of activities for a not-for-profit entity) is presented:
    1. 1
      The employer's contributions made to the plan
    2. 2
      Whether the employer's contributions represent more than 5 percent of total contributions to the plan as indicated in the plan's most recently available annual report (Form 5500 for U.S. plans). The disclosure shall specify the year-end date of the plan to which the annual report relates.
  6. f
    As of the end of the most recent annual period presented:
    1. 1
      Whether a funding improvement plan or rehabilitation plan (for example, as those terms are defined by the Employment Retirement Security Act of 1974) had been implemented or was pending
    2. 2
      Whether the employer paid a surcharge to the plan
    3. 3
      A description of any minimum contribution(s), required for future periods by the collective-bargaining agreement(s), statutory obligations, or other contractual obligations, if applicable.
Factors other than the amount of the employer's contribution to a plan, for example, the severity of the underfunded status of the plan, may need to be considered when determining whether a plan is significant.
715-80-50-6
An employer shall provide a description of the nature and effect of any significant changes that affect comparability of total employer contributions from period to period, such as:
  1. a
    A business combination or a divestiture
  2. b
    A change in the contractual employer contribution rate
  3. c
    A change in the number of employees covered by the plan during each year.
715-80-50-7
The requirements in paragraph 715-80-50-5 assume that the other information about the plan is available in the public domain. For example, for U.S. plans, the plan information in Form 5500 is publicly available. In circumstances in which plan level information is not available in the public domain, an employer shall disclose, in addition to the requirements of paragraphs
715-80-50-5 through 50-6
, the following information about each significant plan:
  1. a
    A description of the nature of the plan benefits
  2. b
    A qualitative description of the extent to which the employer could be responsible for the obligations of the plan, including benefits earned by employees during employment with another employer
  3. c
    Other quantitative information, to the extent available, as of the most recent date available, to help users understand the financial information about the plan, such as total plan assets, actuarial present value of accumulated plan benefits, and total contributions received by the plan.
If the quantitative information in paragraph 715-80-50-5(c), 715-80-50-5(e)(2), or 715-80-50-7(c) cannot be obtained without undue cost and effort, that quantitative information may be omitted and the employer shall describe what information has been omitted and why. In that circumstance, the employer also shall provide any qualitative information as of the most recent date available that would help users understand the financial information that otherwise is required to be disclosed about the plan.
715-80-50-8
Disclosures about multiemployer plans that are subject to the guidance in the preceding paragraph shall be included in a separate section of the tabular disclosure required by paragraph 715-80-50-5.
715-80-50-9
In addition to the information about the significant multiemployer plans that provide pension benefits required by paragraphs 715-80-50-5 and 715-80-50-7, an employer shall disclose in a tabular format for each annual period for which a statement of income or statement of activities is presented, both of the following:
  1. a
    Its total contributions made to all plans that are not individually significant
  2. b
    Its total contributions made to all plans.
715-80-50-10
See Example 1 (paragraph 715-80-55-6) for an illustration of the application of the disclosure requirements in paragraphs
715-80-50-4 through 50-9
).

Multiemployer Plans That Provide Postretirement Benefits Other Than Pensions

715-80-50-11
An employer shall disclose the amount of contributions to multiemployer plans that provide postretirement benefits other than pensions for each annual period for which a statement of income or statement of activities is presented. The disclosures shall include a description of the nature and effect of any changes that affect comparability of total employer contributions from period to period, such as:
  1. a
    A business combination or a divestiture
  2. b
    A change in the contractual employer contribution rate
  3. c
    A change in the number of employees covered by the plan during each year.
The disclosures also shall include a description of the nature of the benefits and the types of employees covered by these benefits, such as medical benefits provided to active employees and retirees.

715-80-55Implementation Guidance and Illustrations

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Implementation Guidance

715-80-55-1
This Section, which is an integral part of the requirements of this Subtopic, provides general guidance related to accounting and disclosure requirements of multiemployer pension and other postretirement benefit plans.
715-80-55-2
An employer participates in a multiemployer defined benefit pension plan. When the employer enters the plan or improves benefits under the plan, the employer unconditionally promises to pay certain future contributions to the plan and executes an agreement that specifies the amounts of those future contributions. The amounts of those future contributions are calculated based on the plan's prior service cost associated with the participants entering the plan or the improved benefits. In return, the plan unconditionally promises to pay retirement benefits to the employer's covered participants in the plan. The existence of the executed agreement does not require that a liability be reported beyond any contributions currently due and unpaid.
715-80-55-3
A multiemployer plan shall not be considered a substantially equivalent replacement plan (a successor plan) for an employer that terminates its single-employer defined benefit pension or other postretirement plan. Acceleration of the recognition as a component of net periodic postretirement benefit cost of prior service cost included in accumulated other comprehensive income would be required.
715-80-55-4
The characteristics and the accounting for a multiemployer plan are sufficiently different from a single-employer plan that neither plan can be a successor plan for the other. The nature of the employer's promise is different in each plan. In a single-employer plan, the employer promises to provide defined benefits. In a multiemployer plan, the employer promises to make a defined contribution. That employees continue to render service is important only if the accounting for a defined benefit plan is being applied, which includes the deferred recognition in earnings of certain items. Because the unit of account is the individual plan, the termination of a single-employer defined benefit plan without replacing it with a successor defined benefit plan concludes the employer's ability to apply defined benefit plan accounting. Therefore, to continue to recognize the prior service cost as a component of net periodic postretirement benefit cost over future periods for the terminated plan in this situation is not appropriate.
715-80-55-5
An employer that has a single-employer postretirement benefit plan decides to provide health care benefits to its retirees through participation with several unrelated employers in a group postretirement health care benefit arrangement that does not result from collective bargaining. The arrangement is administered by an independent board of trustees and provides a uniform level of benefits to all retirees by utilizing group medical insurance contracts. Each participating employer is assessed an annual contribution for its share of insurance premiums, plus administrative costs, and may require its respective retirees to pay a portion of the annual assessment. Retirees whose former employer discontinues paying the annual assessment have the right to continue participation if they assume the cost of the annual premiums needed to maintain their existing benefits. The employer shall not account for this arrangement as a multiemployer plan. A characteristic of a multiemployer plan is that its obligation to retirees continues even if a former employer discontinues its participation in the plan. That characteristic is not present in the arrangement described.

Illustrations

715-80-55-6
This Example illustrates certain, but not all, of the disclosure requirements in paragraphs
715-80-50-4 through 50-9
.
715-80-55-7
Entity A contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:
  1. a
    Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
  2. b
    If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
  3. c
    If Entity A chooses to stop participating in some of its multiemployer plans, Entity A may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
715-80-55-8
Entitiy A's participation in these plans for the annual period ended December 31, 20X0, is outlined in the table below. The "EIN/Pension Plan Number" column provides the Employer Identification Number (EIN) and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available in 20X0 and 20X9 is for the plan's year-end at December 31, 20X9, and December 31, 20X8, respectively. The zone status is based on information that Entity A received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The "FIP/RP Status Pending/Implemented" column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject. Finally, the number of employees covered by Entity A's multiemployer plans decreased by 5 percent from 20X9 to 20X0, affecting the period-to-period comparability of the contributions for years 20X9 and 20X0. The significant reduction in covered employees corresponded to a reduction in overall business. There have been no significant changes that affect the comparability of 20X8 and 20X9 contributions.
  • "Pension Fund" EIN/Pension Plan Number Pension Protection Act Zone Status FIP/RP Status Pending/ Contributions of Entity A Surcharge "Expiration Date of Collective- Bargaining Agreement" 20X0 20X9 " Implemented" 20X0 20X9 20X8 Imposed ABC Fund 34 32-1899999 Red as of 9/30/2009 Yellow as of 9/30/2008 Pending " $1,883,000 " " $2,309,000 " " $2,226,000 " Yes 12/31/20X3 ABC Fund 37 52-5599999 - 002 Green Yellow No " 3,342,000 " " 3,609,000 " " 3,586,000 " No "12/31/20X2 to 12/31/20X3" (a) ABC Fund 40 92-3499999 Yellow Yellow No " 5,798,000 " " 6,435,000 " " 6,374,000 " No 12/31/20X5 ABC Fund 43 82-4299999 Red Red Pending " 3,539,000 " " 3,234,000 " " 3,218,000 " Yes 12/31/20X4 ABC Fund 46 (b) 82-6899999 Green Green No " 778,000 " " 816,000 " " 833,000 " No 12/31/20X3 ABC Fund 49 52-6199999 Yellow Yellow No " 534,000 " " 547,000 " " 491,000 " No 12/31/20X2 ABC Fund 52 72-8599999 - 001 Red Green Implemented " 1,349,000 " " 1,134,000 " " 1,050,000 " No 12/31/20X5 ABC Fund 55 82-2999999 Green Green No " 1,224,000 " " 1,046,000 " " 1,151,000 " No 12/31/20X4 Plans for which plan financial information is not publicly available outside Entity A's financial statements ABC Fund 61 (c) N/A N/A N/A N/A " 418,000 " " 482,000 " " 491,000 " N/A 12/31/20X2 ABC Fund 73 (d) N/A N/A N/A N/A " 1,872,000 " " 1,764,000 " " 1,693,000 " N/A 12/31/20X2 Other funds " 147,000 " " 160,000 " " 169,000 " Total contributions: " $20,884,000 " " $21,536,000 " " $21,282,000 " (a) "Entity A is party to two significant collective-bargaining agreements that require contributions to ABC Fund 37. Agreements D and E expire on 12/31/20X2, and 12/31/20X3, respectively. Of the two, Agreement D is more significant because 70 percent of Entity A's employee participants in ABC Fund 37 are covered by that agreement. Agreement E also is significant because its participants are involved in multiple projects that Entity A is scheduled to start in 20X4. " (b) "ABC Fund 46 utilized the special 30-year amortization rules provided by Public Law 111-192, Section 211 to amortize its losses from 2008. The plan recertified its zone status after using the amortization provisions of that law. " (c) "Plan information for ABC Fund 61 is not publicly available. ABC Fund 61 provides fixed, monthly retirement payments on the basis of the credits earned by the participating employees. To the extent that the plan is underfunded, the future contributions to the plan may increase and may be used to fund retirement benefits for employees related to other employers who have ceased operations. Entity A could be assessed a withdrawal liability in the event that it decides to cease participating in the plan. ABC Fund 61's financial statements for the years ended June 30, 20X0 and 20X9 indicated total assets of $62,000,000 and $51,000,000, respectively; total actuarial present value of accumulated plan benefits of $120,000,000 and $110,000,000, respectively; and total contributions for all participating employers of $9,000,000 and $8,000,000, respectively. The plan's financial statements for the plan years ended June 30, 20X0 and 20X9 indicate that the plan was less than 65 percent funded in both years." (d) "Plan information for ABC Fund 73 is not publicly available. ABC Fund 73 provides fixed retirement payments on the basis of the credits earned by the participating employees. However, in the event that the plan is underfunded, the monthly benefit amount can be reduced by the trustees of the plan. Entity A is not responsible for the underfunded status of the plan because ABC Fund 73 operates in a jurisdiction that does not require withdrawing participants to pay a withdrawal liability or other penalty. Entity A is unable to provide additional quantitative information on the plan because Entity A is unable to obtain that information without undue cost and effort. The collective-bargaining agreement of ABC Fund 73 requires contributions on the basis of hours worked. The agreement also has a minimum contribution requirement of $1,000,000 each year. "
Entity A was listed in its plans' Forms 5500 as providing more than 5 percent of the total contributions for the following plans and plan years:
  • Fund "Year Contributions to Plan Exceeded More Than 5 Percent of Total Contributions (as of December 31 of the Plan's Year-End)" ABC Fund 34 20X9 and 2008 ABC Fund 43 20X8 ABC Fund 52 20X8 ABC Fund 61 20X9
At the date the financial statements were issued, Forms 5500 were not available for the plan years ending in 20X0.

715-80-65Transition and Open Effective Date Information

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715-80-65-1
Paragraph superseded on 06/17/2013 after the end of the transition period stated in Accounting Standards Update No. 2011-09, Compensation—Retirement Benefits—Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer's Participation in a Multiemployer Plan.

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