Accounting for Pensions and Postretirement Benefits
In 2021, the Congressional Research Service reported that over 70% of all U.S. workers have access to employer-sponsored pensions. The need to properly administer and account for pension funds is critical. There are very specific requirements for accounting for pensions and postretirement benefits. ASC 715 Compensation-Retirement Benefits provides guidance on financial reporting for employers who offer pension benefits to their employees. ASC 960 Plan Accounting-Defined Benefit Pension Plans and ASC 962 Plan Accounting-Defined Contribution Pension Plans address the plan accounting standards for defined benefit plans and defined contribution plans respectively. Those detailed calculations of pension cost and reporting requirements produce a complex accounting standard.
This course is designed to help you navigate the complexities of this standard. It begins with an overview of the pension system in the U.S. discussing the nature of pension plans, plan participants’ activities, the classification of pension plans, and types of pension plans and their characteristics. It addresses the significance of pension federal laws, including the Employee Retirement Income Security Act, the Pension Protection Act, the Multiemployer Pension Reform Act, and the American Rescue Plan Act. This course also provides current coverage of the requirements for accounting and reporting on pension plans and postretirement benefits. It includes specific examples to illustrate the application. Relevant references to and excerpts from ASC 715, ASC 960, and ASC 962 are discussed throughout the course.
Course information
This course is included in our MEGA CPE Unlimited Bundle
Course No. 7031
Format: Online pdf (173 pages). Printed book available.
Instructional Delivery Method: QAS Self-Study
Prerequisites: Knowledge of GAAP
Advance Preparation: None
Level: Intermediate
CPE Credit: 7 hrs.
Field of Study: Accounting: Technical
Course expiration: You have one year from date of purchase to complete the course.
Course Revision Date: September 2022
Objectives
- Identify the key provisions of pension federal laws
- Distinguish between defined benefit and defined contribution plans
- Identify the way to evaluate plan assets
- Recognize various measures of pension obligations
- Identify the components of pension expense
- Recognize the pension assets (overfunded plan) and pension liabilities (unfunded plan)
- Identify the unique accounting practice of postretirement benefits
- Recognize the reporting requirements for the employer and pension plans
Course Contents:
Chapter 1: Overview of the Pension System
I. Pension Fund Structure
A) Background Information
1. Nature of Pension Plans
2. Plan Participants’ Activities
B) Pension Plan Classification
1. Single-Employer Plans
2. Multiemployer Plans
3. Multiple Employer Plans
C) Federal Laws for Pension Plans
1. Employee Retirement Income Security Act
2. Pension Protection Act
3. Multiemployer Pension Reform Act
4. American Rescue Plan Act
II. Types of Pension Plans
A) Defined Benefit Plans
B) Defined Contribution Plans
C) Hybrid Pension Plans
1. Cash Balance Plans
2. Floor-Offset Plans
3. Target Benefit Plans
III. Pension Accounting and Reporting
A) Fundamentals of Pension Accounting and Reporting
B) Standards for Accounting and Reporting
1. Overview
Chapter 2: Accounting for Defined Benefit Plans
I. General Principles
II. Measurement of Plan Assets
III. Measurement of Cost and Obligations
A) Pension Obligations
1. Selection of Discount Rates
2. Measures of Plan Liabilities
B) Components of Pension Expense
1. Service Cost
2. Interest Cost
3. Actual Return on Plan Assets
4. Amortization of Prior Service Cost
5. Gain or Loss
IV. Modifications to Pension Plans
A) Settlement
B) Curtailment
C) Termination
V. Recognition of Liabilities and Assets
A) General Rules
B) Classification and Time of Measurement
C) Subsequent Amendment: Practical Expedient for Measuring Obligations and Assets
Review Questions – Group 4
VI. Considerations for Postretirement Benefits
A) Accounting
B) Plan Amendment
C) Health Care Benefits
Comprehensive Illustrations
A) Amortization of Prior Service Cost
1. Accumulated Other Comprehensive Income
2. Plan Amendment
B) Actuarial Gains or Losses/Prior Service Cost
C) Corridor Approach
D) Postretirement Benefit
E) Worksheet
1. Recognition of Liability
2. Prior Service Cost
Chapter 3: Reporting for Defined Benefit Plans
I. Requirements for Plan Sponsors (Employers)
A) Public Entities
B) Nonpublic Entities
C) Entities (Public and Nonpublic) with Two or More Plans
D) Interim Financial Reports
1. Publicly Traded Entities
2. Nonpublic Entities
E) Subsequent Amendment
1. Improve the Presentation of Net Periodic Pension Cost
2. Improve the Effectiveness of Footnote Disclosures
Summary of Disclosure Requirements
A) Pension Plans
B) Postretirement Benefits
II. Requirements for Plan Administrators
A) General Rules
1. Presentation of Financial Statements
2. Dates Used to Present Information
B) Net Assets Available for Benefits
1. Contributions Receivable
2. Investments
3. Operating Assets
4. Liabilities
C) Changes in Net Assets Available for Benefits
D) Actuarial Present Value of Accumulated Plan Benefits
1. Determining Accumulated Plan Benefits
2. Presentation Matters
E) 401(h) Accounts
F) Subsequent Amendment: Interests in Master Trusts
G) Regulatory Reporting Requirements
Chapter 4: Accounting and Reporting for Defined Contribution Plans
I. Accounting Treatment
A) General Rules
B) Pension Expense
C) Contributing Assets from a DB Plan to a DC Plan
II. Reporting and Disclosure
A) General Rules
B) Net Assets Available for Benefits
1. Contributions Receivable
2. Investments
3. Operating Assets
4. Liabilities
C) Changes in Net Assets Available for Benefits
D) Subsequent Amendment: Interests in Master Trusts
E) Regulatory Requirements
2. ERISA
Chapter 5: Other Matters
I. Multiemployer Plans
A) Accounting Treatment
B) Reporting and Disclosure
II. Postemployment Benefits
III. U.S. GAAP vs. IFRS
Appendix A: Employee Benefit Plan Fraud Examples
Appendix B: An Auditor’s Report on Financial Statements for a Defined Contribution Retirement Plan Subject to ERISA
A Good Presentation