401(h) account

This Subtopic governs the form and content of the annual financial statements of a defined benefit pension plan. The overriding objective is to provide information useful in assessing the plan's present and future ability to pay benefits when due, with content focused on plan participants' needs (960-205-10-1 through 10-2). Annual statements must present net assets available for benefits, changes in those net assets, the actuarial present value of accumulated plan benefits, and the significant factors causing the year-to-year change in that actuarial present value (960-205-45-1).

ASC 965-205 (indexed here as 205-965) prescribes the financial statement presentation for health and welfare benefit plans. Defined benefit plans must present, on the accrual basis, a statement of net assets available for benefits, a statement of changes in net assets available for benefits, information about the plan's benefit obligations, and the significant factors causing year-to-year changes in those obligations; defined contribution plans present only the two net-asset statements because the obligation is limited to participants' account balances. It also governs how retiree health benefits funded through a 401(h) account in the sponsor's defined benefit pension plan are reported in the health and welfare plan's financial statements, plus an extensive list of required note disclosures.

ASC 960-30 governs how a defined benefit pension plan reports its net assets available for benefits and the changes in those net assets. Information must be prepared on the accrual basis and presented in enough detail to identify the plan's resources available for benefits and the significant changes during the year (960-30-25-1; 960-30-45-1). It also prescribes the minimum line items in the statement of changes and the special single-line presentation of assets held in a Section 401(h) account, which may not be counted as available for pension benefits.

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.