FASB Amends Master Trust Reporting Requirements for Employee Benefit Plans

Many employee benefit plans hold investments in master trusts, which are subject to certain reporting requirements unique to master trust arrangements. A master trust is a trust for which a regulated financial institution, such as bank or trust company, is a trustee or custodian and holds assets of more than one plan sponsored by a single employer or group of employers under common control.

Since financial statement users have been finding the current disclosures about an employee benefit plan’s interest in a master trust under ASC Topics 960, 962 and 965 to be limited and incomplete, many preparers relied on the AICPA Audit and Accounting Guide Employee Benefit Plans for guidance on disclosures about master trusts in plan financial statements. The new Accounting Standards Update 2017-06 was issued in February 2017 to provide more guidance on disclosure requirements by an employee benefit plan for its interest in a master trust. The update is effective for fiscal years beginning after December 15, 2018 and requires retrospective application to each period for which financial statements are presented. Early adoption is permitted.

There are three key items included in the new standard as follows:

1. Clarification that a plan’s interest in a master trust and any changes in that interest be presented as a separate line item in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively.
2. Provision that all plans disclose the dollar amount of their interest in a master trust measured using fair value by general type of investment (registered investment companies, government securities, common-collective trusts, pooled separate accounts, short-term securities, corporate bonds, common stocks, mortgages, real estate, self-directed brokerage accounts, etc.) as of the date of each statement of net assets available for benefits presented. This disclosure is in addition to the existing requirement to present investments of a master trust by general type of investment. As a result of this update, only plans with undivided interests in a master trust will continue to be required to disclose their percentage interest in the master trust.
3. Requirement that all plans disclose their master trust’s other assets and liabilities such as amounts due to and from brokers for securities bought and sold, respectively, accrued interest and dividends, accrued expenses, receivables and payables relating to derivatives, as well as disclosing the dollar amount of the plan’s interest in each of those balances.

This guidance will reduce diversity in disclosures relating to master trust interests in employee benefit plan financial statements and provide the users of these financial statements with more information, especially when a plan has a specific (divided) rather than proportionate (undivided) interest in a master trust.