Multiemployer Pension Plans Preparation for New Disclosures December 6, 2012

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1 Multiemployer Pension Plans Preparation for New Disclosures December 6, 2012 Mark Prouhet, CPA Senior Manager St. Louis To Receive CPE Credit Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group o Complete group attendance form with Title & date of live webinar Your company name Your printed name, signature & address o All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar o Answer polls when they are provided If all eligibility requirements are met, each participant will be ed their CPE certificates within 15 business days of live webinar 2 1

2 Multiemployer Pension Plans Preparation for New Disclosures December 6, 2012 Mark Prouhet, CPA Senior Manager St. Louis Presentation Agenda Review background information Present new expanded disclosure requirements Discuss determination of significant plans Identify sources for disclosure information Determine how best to prepare & what companies should be doing now 4 2

3 Background Information Accounting Standards Update (ASU) No : Compensation Retirement Benefits Multiemployer Plans (Subtopic ) Issued September 2011 Applicable to nongovernmental entities that participate in multiemployer plans & other postretirement benefit plans Effective for fiscal years ending o After December 15, 2011 (public entities) o After December 15, 2012 (nonpublic entities) 5 Polling Question 1 How many multiemployer plans does your company participate in? o 1-5 o 6-10 o More than 10 o Not sure o Not applicable 6 3

4 Disclosure Prior to ASU Let s revisit what many companies disclosed prior to ASU Multiemployer Pension Plans The Company contributed approximately $ & $ for 2011 & 2010, respectively, to multiemployer plans. The plans provide defined benefits to substantially all unionized Company workers. 7 So What is Changing? Simply put MORE DISCLOSURES! 8 4

5 Required Disclosures (ASU ) Expanded disclosure requirements (in tabular format, when feasible) for each significant plan, including o Employer contributions o Indication of whether employer s contributions represent > 5% of total plan contributions o Which, if any, plans are subject to a funding improvement plan o Expiration date of collective bargaining agreement(s) & any minimum funding arrangements o Most recent certified funding status 9 Required Disclosures (ASU ) Expanded disclosure requirements (in narrative format) for each significant plan, including o Description of the nature & effect of changes affecting comparability for each period in which an income statement is presented Contributions to all other plans in aggregate (included in tabular format) 10 5

6 Polling Question 2 Did ASU change requirements with respect to estimated withdrawal liability? o Yes o No o Not sure 11 Key Distinctions Disclosure of estimated withdrawal liability not required by ASU o However, disclosure/accrual is required if provisions of FASB ASC Topic 450, Contingencies are met Multiemployer vs. multiple employer Standard does not apply to Multiemployer Defined Contribution (DC) Plans 12 6

7 Why the Changes? Enhance transparency & provide financial statement users with more information about commitments employer has made to multiemployer plans & potential effects of participation 13 Illustration of New Required Disclosures Narrative format Tabular format 14 7

8 Illustration of Required Disclosures Narrative Format The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. 15 Narrative Format Previous slide represents only a portion of required narrative disclosures Refer to accounting guidance (ASU & Subtopic ) for complete example of narrative footnote disclosures Remainder of presentation will focus on Tabular footnote disclosures 16 8

9 Illustration of Required Disclosures Tabular Format (left side) Individually significant plans All other plans Pension Fund EIN/Pension Plan Pension Protection Act Number Zone Status 20X2 20X1 ABC Fund Yellow as of Red as of 9/30/20X1 9/30/20X0 ABC Fund Green Yellow ABC Fund Yellow Yellow ABC Fund Red Red ABC Fund 46 (b) Green Green ABC Fund Yellow Yellow ABC Fund Red Green ABC Fund Green Green Plans for which plan financial information is not publicly available outside Entity A s financial statements ABC Fund 61 (c) N/A N/A N/A ABC Fund 73 (d) N/A N/A N/A Other funds 17 Illustration of Required Disclosures Tabular Format (right side) FIP/RP Status Pending/ Implemented Contributions of Company 20X2 20X1 Surcharge Imposed Expiration Date of Collective- Bargaining Agreement Implemented $ $ Yes 12/31/X5 None No 12/31/X4 to12/31/x5 (a) None No 12/31/X7 Pending Yes 12/31/X6 None No 12/31/X5 None No 12/31/X4 Implemented No 12/31/X7 None No 12/31/X6 N/A N/A 12/31/X4 N/A N/A 12/31/X4 18 Total Contributions $0 $0 9

10 What is Significant? Matter of professional judgment Significant may likely be a lower threshold than material Not solely a quantitative determination o Examples Single plan covering a large portion of workforce Severely underfunded plans that have potential to impose additional financial burden on company 19 Possible Sources of Information Internal company personnel & accounting records Annual funding notice Plan funding status Form

11 Pension Fund Pension Fund ABC Fund 34 ABC Fund 37 ABC Fund 40 ABC Fund 43 ABC Fund 46 (b) ABC Fund 49 ABC Fund 52 ABC Fund 55 Possible Sources Legal name found on Annual Funding notice or monthly contribution reports (received by company) Form EIN/Pension Plan Number EIN/Pension Plan Number Possible Sources Annual funding notice Form

12 Pension Protection Act Zone Status Pension Protection Act Zone Status 20X2 20X1 Yellow as of Red as of 9/30/20X1 9/30/20X0 Green Yellow Yellow Yellow Red Red Green Green Yellow Yellow Red Green Green Green Possible Sources Annual funding notice Notice of status o Required if plan is not green o Required within 120 days Other sources & inquiries Form FIP/RP Status Pending/Implemented & Surcharge Imposed FIP/RP Status Pending/ Implemented Implemented None None Pending None None Implemented None Surcharge Imposed Yes No No Yes No No No No Possible Sources Notice of adoption Written inquiry Additional Note N/A if plan is green 24 12

13 Contributions of Company Contributions of Company 20X2 20X1 $ $ Possible Sources Company accounting & other records 25 Polling Question 3 If a Company s fiscal year is different than its plan year, what basis should be used for disclosure of contributions? o Company s fiscal year basis o Plan year basis o Not sure 26 13

14 Expiration Date of Collective- Bargaining Agreement Expiration Date of Collective- Bargaining Agreement 12/31/X5 12/31/X4 to12/31/x5 (a) 12/31/X7 12/31/X6 12/31/X5 12/31/X4 12/31/X7 12/31/X6 Possible Sources Company s Human Resource or Labor Relations Department Authorized bargaining representative 27 Additional disclosure Company Contributions in Excess of 5% of Total Company was listed in its plans Forms 5500 as providing more than five percent of total contributions for the following plans & plan years Pension Fund ABC Fund 34 ABC Fund 43 ABC Fund 52 ABC Fund 61 Year Contributions to Plan Exceeded More Than 5 Percent of Total Contributions (as of December 31 of the Plan s Year-End) 20X1 and 20X0 20X0 20X0 20X1 At date financial statements were issued, Forms 5500 were not available for plan years ending in 20X

15 What If Information is Unavailable? Challenge whether multiple options have been considered & ample time has been allowed If information cannot be obtained without undue cost & effort, quantitative information may be omitted & employer shall describe what information has been omitted & why. Employer shall provide any qualitative information as of most recent date available that would help users understand financial information that otherwise is required to be disclosed 29 Polling Question 4 Have you started accumulating information for new expanded disclosure requirements? o Yes o No o Not applicable 30 15

16 How Best to Prepare Determine if ASU applies Identify all plans Company participates in Determine significant plans Create list of disclosure requirements & determine sources of information Obtain comparative data (where necessary) o Contributions o Pension Protection Act Zone Status Gather information & prepare footnote disclosure 31 What Can We Learn from Public Companies? Most plans are prepared Most plans are fairly responsive; although obtaining information may take time & follow-up Companies will pay for certain information Use Plan EIN & not only Plan name Involve appropriate company personnel 32 16

17 Mark Prouhet, CPA Senior Manager Continuing Professional Education (CPE) Credits BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: The information in BKD webinars is presented by BKD professionals, but applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor before acting on any matters covered in these webinars

18 CPE Credit Up to 1 CPE credit will be awarded upon verification of participant attendance; however, credits may vary depending on state guidelines For questions, concerns or comments regarding CPE credit, please the BKD Learning & Development Department at training@bkd.com 35 18