The Codification contains several Topics for benefit plan accounting due to the differing accounting treatments for various forms of employee benefit plans. The Topics include:
- a
Plan Accounting—Defined Benefit Pension Plans, Topic
960 - b
Plan Accounting—Defined Contribution Pension Plans, Topic
962 - c
Plan Accounting—Health and Welfare Benefit Plans, (this Topic).
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. The Plan Accounting—Health and Welfare Benefit Plans Topic includes the following Subtopics:
- a
Overall
- b
Net Assets Available for Plan Benefits
- c
Plan Benefit Obligations
- d
Terminating Plans
- e
Presentation of Financial Statements
- f
Receivables
- g
Investments—Debt and Equity Securities
- h
Investments—Other
- i
Property, Plant, and Equipment.
The Overall Subtopic provides scope-related guidance for this Topic and an overview of accounting and reporting for
health and welfare benefit plans.
As noted in the preceding paragraph, a plan may establish a trust to hold assets to pay all or part of the covered benefits. The assets may be segregated and legally restricted under a trust arrangement (such as a voluntary employees' beneficiary association or a 501(c)(9) trust, a 401(h) account, or other funding vehicles). Generally, if a separate trust exists, financial statements are required under the Employee Retirement Income Security Act. A trust always exists for a multiemployer plan. Such trusteed plans with more than 100 participants generally will require an audit. For Employee Retirement Income Security Act filings, the U.S. Department of Labor will not accept an accountant's report that covers the assets of more than one plan.
If the trustee of the Voluntary Employees' Beneficiary Association is a bank or trust company, and the trust holds the assets of more than one plan sponsored by a single employer or by a group of entities under common control, it is a master trust subject to the Department of Labor's master trust filing requirements.
Certain group insurance contracts covering health and welfare benefit plans include a provision for a refund, at the end of the policy year, of the excess of premiums paid over the total of paid claims, required reserves, and the fee charged by the insurance entity. Often such experience-rating refunds (or dividends) are not determined by the insurance entity for several months after the end of the policy year.
Health and welfare benefit 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, it 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).
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 health and welfare benefit plan financial statements.