A successor plan is a new pension plan that is established by an employer (or an existing plan that is amended) to provide for the accrual of defined pension benefits for the future services of employees that were previously covered by an old plan.

It is important to understand whether a successor plan has been established when an existing plan is terminated because, if so, recognition of a curtailment gain or loss would generally not be appropriate. As discussed in ASC 715-30-55-132, although employees no longer accrue pension benefits under the terminated pension plan, which would typically indicate a curtailment event has occurred, they do accrue pension benefits under the successor pension plan.

From an accounting viewpoint, the two pension plans are viewed as one pension plan because, in substance, the pension plan has not been terminated. If the successor pension plan provides reduced or increased pension benefits for employees' future service, that change in the benefit formula is accounted for as a plan amendment and, if the reduction in benefits for future service is significant, potentially a curtailment. See PEB 3.2.6 for a discussion of the accounting for plan amendments and PEB 4.4 for a discussion of the accounting for curtailments.

Importantly, a defined contribution plan is not considered a successor plan in this context because it does not provide for the accrual of defined benefits. Similarly, a multiemployer plan would not be considered a successor plan for a single employer plan, but careful consideration of the nature of the multiemployer arrangement is warranted prior to concluding that curtailment or plan termination accounting is appropriate.