At its meeting on June 12, 2014, the Group members of the AcSB’s IFRS Discussion Group (IDG) observed that the economics of such plans, the magnitude of the associated potential risk that employer contributions would increase, the fact that there is no further obligation to pay the benefits after the initial increase in employer contributions (as would be expected for a defined benefit plan) and materiality, could lead some to argue that they should be classified as defined contribution plans.

However, Group members supported that shared-risk plans with the characteristics described in the fact pattern are defined benefit plans. Such plans do not meet the IAS 19 definition of a defined contribution plan (for example, contributions are not fixed and the employer has a legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all the employee benefits relating to current and prior periods). While the likelihood an employer would need to increase contributions may be low, that probability isn’t relevant.

The Group did not recommend any further action be taken on this issue at this time.

Review the IFRS Discussion Group on the AcSB's Web site.