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In August 2015, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update (“ASU”) to help simplify the reporting on employee benefit plan financial statements. The update became effective for plan years after December 15, 2015. Employee benefit plan administrators commonly have raised questions related to the implementation of this standard. Let’s go over a “refresher” to ensure your plan is in compliance with this standard.

ASU 2015-12 aims to reduce the cost and complexity in employee benefit plan financial reporting and disclosure requirements. Upon adoption of this standard, benefit plans will no longer require the following:

  1. Measure fully benefit-responsive investment contracts (FBRIC’s) at fair value
  2. Simplify the investment disclosure requirements
  3. Provide a measurement date practical expedient for employee benefit plans

During their simplification initiative, the FASB created the following update to help enhance the information and effectiveness of the financial statements for users. With this update, employee benefit plans will begin to present their FBRIC’s at contract value in the statement of net assets available for benefits. For every investment contract, the plan will need to disclose a description of the nature of those investment contracts, how the contract operates, by the type of investment contract, events that limit the ability of the plan to transact at contract value with the issuer, and a description of the events and circumstances that would allow issuers to terminate contracts at an amount different from contract value.

This update also simplifies investment disclosures. Certain changes in disclosures include:

  • Plans are no longer required to provide disclosures by investment class, but must instead provide such disclosures by general type.
  • Plan investments representing 5% or more of net assets available for benefits are not required to be presented individually.
  • Presentation of net appreciation or depreciation for each general type of plan investment is no longer required; however, plan investment appreciation or depreciation must still be presented in the aggregate.
  • Employee benefit plans are not required to disclose the investment strategies of plan investments that are: measured at fair value by using the net asset value practical expedient and are in a fund entity that directly files Form 5500 with the U.S. Department of Labor.

Lastly, the ASU permits plans to use an alternative measurement date for plan investments; the month-end date closest to the plan’s fiscal year-end when the fiscal year-end does not coincide with a month-end.

For assistance in implementing this accounting standard, or for additional information, please feel free to contact Kristi Yanover, Audit Partner, at (858) 558-9200 or any member of our Accounting & Assurance Team as we would be happy to assist you.

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