ASC

ASC 962-10

Overall

962 Plan Accounting—Defined Contribution Pension Plans

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In brief

IntermediateIndustry-specificCompensation and benefitsFinancial statement presentationSubsequent measurement

ASC 962-10 is the Overall subtopic for financial reporting **by** a defined contribution pension plan itself (not by the sponsoring employer, which follows Topic 715). Its objective is to provide information useful in assessing the plan's present and future ability to pay benefits when due; because plan net assets available for benefits equal the sum of participants' individual account balances, those net assets are measured and reported at values meaningful to users—principally the amount a participant could currently withdraw, borrow, or transfer. It applies to all employee benefit plans providing benefits based on amounts contributed to an employee's individual account, and not to defined benefit plans (Topic 960) or health and welfare plans (Topic 965).

Key points (7)
  • Plan Accounting Topics govern reporting by the plan, while Topic 715 and the Compensation Topics govern reporting by the employer (962-10-05-1).
  • The primary objective of a defined contribution plan's financial statements is to provide information useful in assessing the plan's present and future ability to pay benefits when due; net assets available for benefits equal the sum of participants' individual account balances (962-10-10-1).
  • Net assets available for benefits should be measured and reported at values meaningful to financial statement users (962-10-05-5), including the amount participants would receive if they currently withdrew, borrowed, or transferred funds (962-10-05-6).
  • Participants are key users because they bear the investment risk and plan transactions directly affect their benefits, unlike in defined benefit plans (962-10-05-4).
  • Primary users are the plan sponsor(s), plan participants, and the DOL, IRS, and SEC (962-10-05-7).
  • Scope: all entities that are employee benefit plans providing benefits based on amounts contributed to an employee's individual account (962-10-15-2); excluded are defined benefit pension plans (Topic 960) and health and welfare plans that are not also defined contribution plans (962-10-15-3).
  • ERISA reporting requirements are generally not codified but must still be considered by preparers of defined contribution plan financial statements (962-10-05-8 through 05-9).

For students. The classic trap is confusing plan-level reporting (Topics 960/962/965) with employer-level pension accounting (Topic 715)—962 tells the plan how to report its own net assets, not how the sponsor records pension cost. Remember that in a DC plan there is no benefit obligation to measure: net assets available for benefits simply equal the sum of participants' account balances.

defined contribution pension planplan financial statementsnet assets available for benefitsparticipant individual account balancesability to pay benefits when dueerisa reportingplan versus employer accounting

Machine-generated study aid for ASC 962-10. Check the source paragraphs below.

962-10-00Status

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962-10-05Overview and Background

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962-10-05-1
The Codification contains several Topics for the accounting and reporting by a plan (as opposed to an employer) due to the differing accounting treatment for various forms of employee benefit plans. The Compensation Topics address the accounting and reporting by the employer. The Plan Accounting Topics include:
  1. a
    Plan Accounting—Defined Benefit Pension Plans, Topic 960
  2. b
    Plan Accounting—Defined Contribution Pension Plans, (this Topic)
  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 termination benefits to its employees.
962-10-05-2
The Plan Accounting—Defined Contribution Pension Plans Topic includes the following Subtopics:
  1. a
    Overall
  2. b
    Terminating Plans
  3. c
    Presentation of Financial Statements
  4. d
    Notes to Financial Statements
  5. e
    Receivables
  6. f
    Investments—Other.
962-10-05-3
The Overall Subtopic provides guidance on the accounting and reporting for defined contribution pension plans.
962-10-05-4
Information relevant to the primary users of defined contribution plan financial statements—plan participants—is different from that which is relevant to users of defined benefit plan financial statements. In defined contribution plans, plan participants have a greater vested interest in monitoring the financial condition and operations of the plan since they bear investment risk under these plans and plan transactions can directly affect their benefits.
962-10-05-5
Consistent with the objective of a defined contribution plan's financial statements, net assets available for benefits of defined contribution plans should be measured and reported at values that are meaningful to financial statement users.
962-10-05-6
Information that is useful to plan participants includes the amount they would receive currently if they were to withdraw or borrow funds from or transfer funds within the plan.
962-10-05-7
The primary users of a defined contribution plan's financial statements include all of the following:
  1. a
    Plan sponsor(s)
  2. b
    Plan participants
  3. c
    The following governmental regulators:
    1. 1
      The U.S. Department of Labor
    2. 2
      The Internal Revenue Service (IRS)
    3. 3
      The Securities and Exchange Commission (SEC).

The Employee Retirement Income Security Act of 1974

962-10-05-8
Defined contribution 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).
962-10-05-9
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 contribution plan financial statements.

962-10-10Objectives

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962-10-10-1
The primary objective of a defined contribution plan's financial statements is to provide information that is useful in assessing the plan's present and future ability to pay benefits when they are due. In a defined contribution plan, the plan's net assets available to pay benefits equal the sum of participants' individual account balances. Accordingly, benefits that can be paid by the plan when they are due relate to the value of the assets that may currently be made available to the individual participants.

962-10-15Scope and Scope Exceptions

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Overall Guidance

962-10-15-1
The Subtopics within the Plan Accounting—Defined Contribution Pension Plans Topic only provide incremental guidance for the entities defined in this Scope Section, or as further defined in the Scope Sections of the individual Plan Accounting—Defined Contribution Pension Plans Subtopics.

Entities

962-10-15-2
The guidance in this Topic applies to all entities that are employee benefit plans that provide benefits based on amounts contributed to an employee's individual account.
962-10-15-3
The guidance in this Topic does not apply to the following entities:
  1. a
    Defined benefit pension plans (see Topic 960)
  2. b
    Health and welfare benefit plans that are not also defined contribution plans (see Topic 965).

962-10-65Transition and Open Effective Date Information

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962-10-65-1
Paragraph superseded on 07/05/2017 after the end of the transition period stated in Accounting Standards Update No. 2015-12 (Part I), Plan Accounting (Topics 962 and 965): Fully Benefit-Responsive Investment Contracts.
962-10-65-2
Paragraph superseded on 07/05/2017 after the end of the transition period stated in Accounting Standards Update No. 2015-12 (Part II), Plan Accounting (Topics 960, 962, and 965): Plan Investment Disclosures.
962-10-65-3
Paragraph superseded on 07/05/2017 after the end of the transition period stated in Accounting Standards Update No. 2015-12 (Part III), Plan Accounting (Topics 960, 962, and 965): Measurement Date Practical Expedient.
962-10-65-4
Paragraph superseded on 07/20/2020 after the end of the transition period stated in Accounting Standards Update No. 2017-06, Plan Accounting (Topics 960, 962, and 965): Employee Benefit Plan Master Trust Reporting.

Related subtopics