Upcoming Changes to Employee Benefit Plans
Gisèle Couturier, Audit Senior Manager
Here are some upcoming changes you should be aware of related to employee benefit plans:
Congress Changes Form 5500 Extension Date
For tax years beginning after December 31, 2015, the extension for filing Form 5500 will change from 2.5 months to 3.5 months for calendar year plans. This means that for a benefit plan year ending on December 31, 2016, the extended deadline will be November 15, rather than October 15. There is no change for tax year 2015.
FASB Issues Accounting Standards Update 2015-12
On July 31, 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965). The amendments in this ASU are the result of FASB’s effort to simplify the accounting for employee benefit plans and address stakeholder concerns of cost and usefulness of information for decision making.
Part I: Fully Benefit-Responsive Investment Contracts
Currently, fully benefit-responsive investment contracts are measured and reported at fair value, with an adjustment to reconcile contract value to fair value on the face of the financial statements. With these amendments, contract value will be the only required measurement for fully benefit-responsive investment contracts. This applies to both presentation and disclosure.
Disclosures to help users understand the nature and risks of fully benefit-responsive contracts will still be required.
Part II: Plan Investment Disclosures
Currently, plans are required to disclose investments representing 5 percent or more of net assets available for benefits. These amendments remove this requirement.
Plans are required to disclose the net appreciation/depreciation of investments by type. This will now be presented in total only, not by type.
Plans are also required to group and disclose assets by type (i.e. common collective trusts, common stock, corporate bonds) in accordance with Topics 960, 962, and 965, and based on nature, characteristics, and risks in accordance with Topic 820, Fair Value Measurement (i.e. index funds, growth funds, fixed income funds). This has often led to plans grouping their assets in more than one way in order to satisfy both requirements. These amendments require assets to be grouped by general type only.
Part III: Measurement Date Practical Expedient
For employee benefit plans that have a fiscal year-end that does not coincide with a month-end, the amendment provides a practical expedient that allows plans to measure investments as of the month-end date closest to the fiscal year-end date.
The selected measurement date, as well as any contributions, distributions, and other significant activity between the measurement date and the fiscal year-end should be disclosed.
Part I affects entities with fully benefit-responsive investment contracts. Part II affects entities that follow the requirements in Topics 960, 962, and 965. Part III affects entities that follow the requirements in Topics 960, 962, and 965 and have a fiscal year-end that does not coincide with a month-end.
The amendments in this ASU are effective for fiscal years beginning after December 15, 2015 and should be applied retrospectively for all reporting periods presented. Early application is permitted.
For more information pertaining to ASU No. 2015-12, please visit the FASB website.
If you have any questions, please call your BNN service provider at 1.800.244.7444.
Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.