After many months of debate, the Financial Accounting Standards Board (FASB) approved a final revised standard which details the information employers must disclose in their financial statements regarding their financial obligations to multi-employer pension plans.

In a multi-employer pension plan, which includes union pension and healthcare plans, assets contributed by one participating company may be used to provide benefits to employees of another participating company. This is because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. This pronouncement was designed to create greater transparency in financial reporting by requiring more disclosures related to such plans.

This standard has received much attention from companies across all industries--with a particular emphasis on construction companies, many of whom may be affected--as well as from auditors, actuarial firms, and other professionals due to the practical issues that employers and plans would have to address in complying with these requirements.

The new disclosure requirements would include the following:

• The amount of employer contributions made to each significant plan and a total amount made to all plans;
• Disclosure would be required if an employer's contributions represent more than 5% of the total contributions;
• Disclosure would be required if any plans are subject to a funding improvement process;
• Expiration dates of collective bargaining agreements and any minimum funding arrangements;
• The most recent certified fund status (zone status), or the percentage funded if zone status is not available; and
• A description of the nature and effect of any changes affecting comparability for each period in which an income statement is presented

This standard is expected to be finalized in September, 2011 and nonpublic companies would be required to comply with the disclosure requirements for fiscal years ending after December 15, 2012. To learn more about how these changes may affect your company, please contact a member of the SMF Construction Industry Service Group, 973-472-6250.