FASB Requirements

The Financial Accounting Standards Board (FASB) has issued several statements related to retiree health benefits.  The Statements establish accounting standards for employers’ accounting for these retirement benefits other than pensions.  The Board’s objective in issuing these Statements is to improve employers’ financial reporting for retirement benefits.

This information is provided simply to make you aware of these accounting standards although as a practical matter, many of them will not apply to unfunded welfare benefit plans.  You should consult an accounting professional or legal counsel to determine your compliance obligations.

Statement 106

This Statement establishes accounting standards for an employer’s accounting for post retirement benefits other than pensions (referred to as post retirement benefits).  It requires that an employer’s obligation for postretirement benefits expected to be provided to an employee be fully accrued by the date that employee attains full eligibility for all of the benefits expected to be received by that employee, any beneficiaries, and covered dependents (the full eligibility date), even if the employee is expected to render additional service beyond that date.

• This accounting reflects the fact that at the full eligibility date the employee has provided all of the service necessary to earn the right to receive all of the benefits that employee is expected to receive under the plan.

Statement 112

This Statement establishes accounting standards for employers who provide benefits to former or inactive employees after employment but before retirement (referred to in this Statement as post-employment benefits).

Post-employment benefits are all types of benefits provided to former or inactive employees, their beneficiaries, and covered dependents.

• Those benefits include, but are not limited to, salary continuation, supplemental unemployment benefits, severance benefits, disability-related benefits (including workers’ compensation), job training and counseling, and continuation of benefits such as health care benefits and life insurance coverage.

This Statement requires employers to recognize the obligation to provide post-employment benefits in accordance with FASB Statement No. 43 or FASB Statement No. 5.

If an obligation for post-employment benefits is not accrued in accordance with Statements 5 or 43 only because the amount cannot be reasonably estimated, the financial statements shall disclose that fact.

Statement 158

This Statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to recognize the funded status of a benefit plan—measured as the difference between plan assets at fair value (with limited exceptions) and the benefit obligation—in its statement of financial position.

• For a post-retirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated post-retirement benefit obligation.

Additional Resurces

Summary of Statement 106
Summary of Statement 112
Summary of Statement 158