Plan Accounting—Health and Welfare Benefit Plans

ASC 965 sets out the special-purpose financial reporting model for health and welfare benefit plans as reporting entities in their own right (distinct from the sponsoring employer's accounting under Topic 715, and parallel to Topic 960 for defined benefit pension plans and Topic 962 for defined contribution pension plans). The Overall subtopic (965-10) fixes the scope—all defined benefit and defined contribution health and welfare plans—and explains that whether benefits are insured or self-funded through a trust (VEBA/501(c)(9), 401(h) account, master trust) drives how assets and obligations are accounted for. The two core statements are then built up: 965-20 covers net assets available for benefits and the changes in them (accrue non-benefit liabilities, record noncash contributions at fair value less costs to sell, show contributions by source, net appreciation/depreciation, claims and premiums, and administrative expenses), while 965-30 covers the plan's own benefit obligations, measured at actuarial present value as of the plan year end in three classifications with a reconciliation of year-to-year changes. 965-40 overrides this ongoing-plan model when liquidation is imminent, requiring the liquidation basis of accounting under Subtopic 205-30 and measurement of benefit obligations on that basis.

Subtopics

1. 10Overall15 ¶

   ASC 965-10 is the Overall subtopic of the health and welfare benefit plan accounting Topic; it defines the scope and gives an overview of how such plans report. It applies to all entities that are defined benefit or defined contribution health and welfare benefit plans, describes how benefits may be delivered (insured contracts versus a self-funded trust such as a VEBA/501(c)(9) trust or 401(h) account), and flags that the insurance arrangement drives how assets and benefit obligations are accounted for. It also notes the ERISA reporting backdrop, including that many plans must file GAAP financial statements.

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2. 20Net Assets Available for Plan Benefits11 ¶

   ASC 965-20 governs the "net assets available for benefits" component of health and welfare benefit plan financial statements. It requires the plan to accrue non-benefit liabilities (e.g., securities purchased, income taxes payable, third-party administrator fees), record noncash contributions at fair value less costs to sell if significant, and present a statement of net assets available for benefits showing total assets, total liabilities, and net assets available for benefits. The companion statement of changes must show, in sufficient detail, the significant changes for the year, including contributions by source, net appreciation/depreciation in fair value, investment income, claims payments, premiums, and administrative expenses.

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3. 30Plan Benefit Obligations47 ¶

   ASC 965-30 governs how a health and welfare benefit plan measures and reports its own benefit obligations (as distinct from the sponsoring employer's obligations). Benefit obligations, measured at actuarial present value as of the plan's year end, comprise three classifications: (1) claims payable, claims incurred but not reported (IBNR), and premiums due to insurance entities; (2) accumulated eligibility credits and postemployment benefits; and (3) postretirement benefits split among retirees, participants fully eligible, and participants not yet fully eligible (965-30-35-1). Plans must also present the significant factors causing year-to-year changes in each classification.

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4. 40Terminating Plans9 ¶

   ASC 965-40 governs accounting and reporting by health and welfare benefit plans that are terminating. Once liquidation of the plan is deemed imminent under paragraph 205-30-25-2, the plan must prepare its financial statements using the liquidation basis of accounting under Subtopic 205-30, including for the year-end statements if imminence is determined before the plan year ends. Benefit obligations are measured on the liquidation basis rather than as actuarial present values, and the termination or wasting-trust circumstances must be disclosed in all subsequent plan financial statements.

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