Accounting for Pensions and Defined Benefit Plans
Credit Union Advisor, 2006 Fall 

The FASB recently issued Statement of Financial Accounting Standards No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, which significantly changes the accounting for pension and postretirement benefit obligations by employers, including the following requirements:

• Recognition of an asset or liability in the balance sheet for the full over-/under-funded status of a plan.
• Recognition in comprehensive income (an adjustment to equity) of changes in a benefit plan’s funded status that is not included in the net periodic benefit cost.
• Use of the balance sheet date as the measurement date for the plan.
• Other new financial statement disclosures regarding certain effects on net periodic benefit cost.

For credit unions, FAS 158 becomes effective for fiscal years ending after June 15, 2007. The requirement to use the balance sheet date as the measurement date for the plan is effective for fiscal years ending after December 15, 2008.

If your credit union has a defined benefit pension plan or other postretirement plan, you have time to evaluate the implications of this change on your financial statements. However, we encourage you to begin conversations with your plan valuation experts to determine the potential impact of the change on the amounts you will report. Your Plante & Moran representative can be helpful in sorting out the impact of FAS 158 on your financial statements and your credit union’s equity. In addition, if there is need, our employee benefits team can help the credit union evaluate the overall effectiveness of the benefit plan program.