Master Trust Reporting for Employee Benefit Plans

The Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2017-06 on Feb. 27, 2017, which provides guidance on the disclosure of an employee benefit plan’s interest in a master trust. ASU 2017-06 became effective for fiscal years beginning after Dec. 15, 2018; since many employee benefit plans hold investments in master trusts, they are therefore subject to certain unique reporting requirements.

FASB describes a master trust as a trust for which a regulated financial institution (such as a bank, trust company or other institution that is regulated, supervised and subject to examination by a state or federal agency) acts as the trustee or custodian and holds assets of more than one plan sponsored by a single employer or group of employers under common control.1 Prior to the release of ASU 2017-06, financial statement preparers previously relied on the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for employee benefit plans as the guidance for master trust disclosure requirements within the financial statement. However, ASU 2017-06 was issued to provide a more effective and complete requirement for reporting and disclosure of a plan’s interest in a master trust. A retrospective application is required to each period for which financial statements are presented.

The following are the significant provisions of ASU 2017-06 for master trust reporting:

  • Any interest in a plan’s master trust, as well as any changes in that interest, must be presented in separate line items in the statement of net assets available for benefits as well as the statement of changes in net assets available for benefits, respectively.
  • In addition to the requirement to present master trust investments by general type of investment, all plans are to disclose the dollar amount of their master trust interest, which is measured using fair value by general type of investment, as of the date of each statement of net assets available for benefits presented. Plans with divided interests are no longer required to disclose the percentage of interest within the master trust.
  • Health and welfare benefit plan financial statements with Section 401(h) accounts are no longer required to provide investment disclosures related to such accounts. They are still required to disclose the name of the defined benefit pension plan in which the investment disclosures are provided, which allows participants to access the statements for any information about the Section 401(h) account assets.
  • All plans that hold an interest in a master trust must disclose their master trust’s other asset and liability balances and the dollar amount of the plan’s interest in each of those balances.

As many organizations head into a new financial reporting period, master trust reporting requirements are an important part of your discussions with your trusted advisor. For more questions about employee benefit plans and master trust reporting, please reach out to us at info@dhg.com.

Sources

  1. Financial Accounting Standards Board, Accounting Standards Update 2017-06, February 2017.