# ASC 960-10-05: Plan Accounting—Defined Benefit Pension Plans — Overall — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/960/10/#05-overview-and-background)

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## ASC 960-10-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/960/10/#05-overview-and-background)

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##### [960-10-05-1](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-1)

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The Codification contains several Topics for benefit plan accounting due to the differing accounting treatments for various forms of [employee](https://asc.understandingaccounting.org/glossary/e/#employee "A person who has rendered or is presently rendering service.") [benefit](https://asc.understandingaccounting.org/glossary/b/#benefits "The monetary or in-kind benefits or benefit coverage to which participants may be entitled under a pension plan or a health and welfare plan (which can include active, terminated, and retired employees or their dependents or beneficiaries). Examples of benefits may include, but are not limited to, health care benefits, life insurance, legal, educational, and advisory services, pension benefits, disability benefits, death benefits, and benefits due to termination of employment.") plans. The Topics include:

1.  a
    
    Plan Accounting—Defined Benefit Pension Plans, (this Topic)
    
2.  b
    
    Plan Accounting—Defined Contribution Pension Plans, Topic 962
    
3.  c
    
    Plan Accounting—Health and Welfare Benefit Plans, Topic 965.
    

Additionally, Topic 715 addresses financial accounting and reporting for an employer that offers pension, other postretirement, and certain special or contractual benefits to its employees.

##### [960-10-05-2](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-2)

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The Plan Accounting—Defined Benefit Pension Plans Topic includes the following Subtopics:

1.  a
    
    Overall
    
2.  b
    
    [Accumulated Plan Benefits](https://asc.understandingaccounting.org/glossary/a/#accumulated-plan-benefits "Future benefit payments that are attributable under the provisions of a pension plan to employees' service rendered to the benefit information date. Accumulated plan benefits comprise benefits expected to be paid to any of the following: Retired or terminated employees or their beneficiaries Beneficiaries of deceased employees Present employees or their beneficiaries.")
    
3.  c
    
    Net Assets Available for Plan Benefits
    
4.  d
    
    Terminating Plans
    
5.  e
    
    Presentation of Financial Statements
    
6.  f
    
    Receivables
    
7.  g
    
    Investments—Other
    
8.  h
    
    Property, Plant, and Equipment.

##### [960-10-05-3](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-3)

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The Overall Subtopic provides scope-related guidance for this Topic and an overview of accounting and reporting for [defined benefit pension plans](https://asc.understandingaccounting.org/glossary/d/#defined-benefit-plan "A defined benefit plan provides participants with a determinable benefit based on a formula provided for in the plan. Defined benefit health and welfare plans—Defined benefit health and welfare plans specify a determinable benefit, which may be in the form of a reimbursement to the covered plan participant or a direct payment to providers or third-party insurers for the cost of specified services. Such plans may also include benefits that are payable as a lump sum, such as death benefits. The level of benefits may be defined or limited based on factors such as age, years of service, and salary. Contributions may be determined by the plan's actuary or be based on premiums, actual claims paid, hours worked, or other factors determined by the plan sponsor. Even when a plan is funded pursuant to agreements that specify a fixed rate of employer contributions (for example, a collectively bargained multiemployer plan), such a plan may nevertheless be a defined benefit health and welfare plan if its substance is to provide a defined benefit. Defined benefit pension plan—A pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service, or compensation. Any pension plan that is not a defined contribution pension plan is, for purposes of Subtopic 715-30, a defined benefit pension plan. Defined benefit postretirement plan—A plan that defines postretirement benefits in terms of monetary amounts (for example, $100,000 of life insurance) or benefit coverage to be provided (for example, up to $200 per day for hospitalization, or 80 percent of the cost of specified surgical procedures). Any postretirement benefit plan that is not a defined contribution postretirement plan is, for purposes of Subtopic 715-60, a defined benefit postretirement plan. (Specified monetary amounts and benefit coverage are collectively referred to as benefits.)").

##### [960-10-05-4](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-4)

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Defined benefit pension plans provide a promise to pay to participants specified benefits that are determinable and are based on such factors as age, years of [service](https://asc.understandingaccounting.org/glossary/s/#service "Employment taken into consideration under a pension plan. Years of employment before the inception of a plan constitute an employee's past service; years thereafter are classified in relation to the particular actuarial valuation being made or discussed. Years of employment (including past service) before the date of a particular valuation constitute prior service; years of employment following the date of the valuation constitute future service; a year of employment adjacent to the date of valuation, or in which such date falls, constitutes current service."), and compensation. A plan's net assets are the existing means by which it may provide benefits, therefore, [net asset information](https://asc.understandingaccounting.org/glossary/n/#net-asset-information "Information regarding the net assets available for benefits.") is necessary in assessing a plan's ability to pay benefits when due.

##### [960-10-05-5](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-5)

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This Topic does not require the preparation or distribution of any plan's financial statements.

#### The Employee Retirement Income Security Act of 1974

##### [960-10-05-6](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-6)

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Defined benefit pension plans are generally subject to certain of the reporting and other requirements of the Employee Retirement Income Security Act of 1974. In addition to establishing certain minimum standards for participation, vesting, and funding for employee benefit plans of private entities, the Act also requires annual reporting of certain information to particular governmental agencies and summarized information to plan participants. For many plans, the reporting requirements include financial statements prepared in conformity with generally accepted accounting principles (GAAP).

##### [960-10-05-7](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-7)

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The reporting requirements of the Act, except for certain particular references, are not included in the Codification, but they should nonetheless be considered by those responsible for the preparation of defined benefit plan financial statements.

##### [960-10-05-8](https://asc.understandingaccounting.org/asc/960/10/#960-10-05-8)

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The following terms are widely used when addressing benefit plan accounting and reporting, yet are not included in the text of the standards:

1.  a
    
    [Actuarial asset value](https://asc.understandingaccounting.org/glossary/a/#actuarial-asset-value "A value assigned by an actuary to the assets of a plan generally for use in conjunction with an actuarial cost method.")
    
2.  b
    
    [Benefit security](https://asc.understandingaccounting.org/glossary/b/#benefit-security "The plan's present and future ability to pay benefits when due.")
    
3.  c
    
    [General account](https://asc.understandingaccounting.org/glossary/g/#general-account "An undivided fund maintained by an insurance entity that commingles plan assets with other assets of the insurance entity for investment purposes. That is, funds held by an insurance entity that are not maintained in a separate account are in its general account.")
    
4.  d
    
    [Nonvested benefit information](https://asc.understandingaccounting.org/glossary/n/#nonvested-benefit-information "The actuarial present value of nonvested accumulated plan benefits.")
    
5.  e
    
    [Retired life fund](https://asc.understandingaccounting.org/glossary/r/#retired-life-fund "That portion of the funds under an immediate participation guarantee contract that is designated as supporting benefit payments to current retirees.").