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ASC 715 — Compensation — Retirement Benefits

Overview

The full text of ASC 715, Compensation — Retirement Benefits, can be found in the FASB Accounting Standards Codification (link to the FASB's Web site; registration required). Also, the full text of the Codification and Deloitte-authored Q&As related to the Codification are available in the Deloitte Accounting Research Tool (DART) Web site (subscription required).

ASC 715 comprises six Subtopics (Overall, Defined Benefit Plans—General, Defined Benefit Plans—Pension, Defined Benefit Plans—Other Postretirement, Defined Contribution Plans, and Multiemployer Plans). Below is an overview of each Subtopic.

715-10 Overall

ASC 715-10 discusses the overall scope of ASC 715 and the other Subtopics within ASC 715

715-20 Defined Benefit Plans—General

ASC 715-20 notes that it "provides guidance on the disclosure and other accounting and reporting requirements related to single-employer defined benefit pension and other postretirement benefit plans" and notes that it addresses:

 

  1. The content and organization of annual disclosures about defined benefit pension plans and other postretirement benefits
  2. Disclosures required for interim-period financial reports.

715-30 Defined Benefit Plans—Pension

ASC 715-30 notes the following:

 

This Subtopic provides guidance on defined benefit pension accounting for an employer that offers pension benefits to its employees. This Subtopic focuses on an employer's accounting for a single-employer defined benefit pension plan.

Many of the provisions in this Subtopic are the same as or are similar to the provisions of Subtopic 715-60. Consequently, the guidance provided in that Subtopic may be useful in understanding and implementing many of the provisions of this Subtopic. However, there are differences between the specific requirements of the two Subtopics, and therefore the specific guidance in one Subtopic shall not be used to override guidance of the other.

715-60 Defined Benefit Plans—Other Postretirement

ASC 715-60 notes the following:

 

A postretirement benefit is part of the compensation paid to an employee for services rendered. In a defined benefit other postretirement plan, the employer promises to provide, in addition to current wages and benefits, future benefits during retirement.

Generally, the amount of those benefits depends on the benefit formula (which may include factors such as the number of years of service rendered or the employee's compensation before retirement or termination), the longevity of the retiree and any beneficiaries and covered dependents, and the incidence of events requiring benefit payments (for example, illnesses affecting the amount of health care required).

In most cases, services are rendered over a number of years before an employee retires and begins to receive benefits or is entitled to receive benefits as a need arises. Even though the services rendered by the employee are complete and the employee has retired, the total amount of benefits the employer has promised and the cost to the employer of the services rendered are not precisely determinable but can be estimated using the plan's benefit formula and estimates of the effects of relevant future events.

Although this Subtopic applies to all defined benefit postretirement plans other than pensions, postretirement health care benefits are likely to be the most significant in terms of cost and prevalence, and certain of the issues that arise in measuring those benefits are unique.

Many of the provisions in this Subtopic are the same as or similar to the provisions of Subtopic 715-30. Consequently, the guidance provided in that Subtopic may be useful in understanding and implementing many of the provisions of this Subtopic. However, there are differences between the specific requirements of this Subtopic and that Subtopic, and therefore the specific guidance in one Subtopic shall not be used to override guidance of the other.

715-70 Defined Contribution Plans

ASC 715-70 notes the following:

 

This Subtopic provides guidance on the accounting and reporting of defined contribution plans.

An employer's present obligation under the terms of a plan is fully satisfied when the contribution for the period is made, provided that costs (defined contributions) are not being deferred and recognized in periods after the related service period of the individual to whose account the contributions are to be made.

In a postretirement health plan, an employer may establish individual postretirement health care accounts for each employee, each year contributing a specified amount to each active employee's account. The balance in each employee's account may be used by that employee after the employee's retirement to purchase health care insurance or for other health care benefits. Rather than providing for defined health care benefits, the employer is providing a defined amount of money that may be used by retirees toward the payment of their health care costs.

715-80 Multiemployer Plans

ASC 715-80 notes the following:

 

This Subtopic provides guidance on the accounting and reporting of multiemployer pension and other postretirement benefit plans. For purposes of this Subtopic, a multiemployer plan is a pension plan or other postretirement benefit plan to which two or more unrelated employers contribute, usually pursuant to one or more collective-bargaining agreements.

In a multiemployer setting, eligibility for benefits is defined by the plan; retired employees continue to receive benefits whether or not their former employers continue to contribute to the plan.

However, in a multiemployer postretirement benefit plan, plan participants not yet eligible for benefits may lose accumulated postretirement benefits if their current or former employer withdraws from a plan unless they take or have a job with other employers who participate in the plan.

While the postretirement benefit plan may have the option of canceling the accrued service credits that apply toward the required service, within the bargaining unit, of plan participants who were employed by a withdrawing employer and who become or are employed by another participating employer, that rarely occurs because of the difficulty of matching employees to specific employers. For example, in certain industries, an employee may work for more than one employer in a single day and different employers on different days, making it difficult to associate any portion of that employee's past service with a specific employer.

Content from the FASB Accounting Standards Codification® included at http://www.usgaapplus.com is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission.

FASB Accounting Standards Updates

    Proposed FASB Accounting Standards Updates

    No current proposed ASUs on Topic 715.

    Related resources

    See our comprehensive collection of news and publications related to retirement benefits.

    International guidance

    For the IASB's guidance on this topic, see IAS 19, Employee Benefits.

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.