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When an entity participates in a pension or retirement benefit plan sponsored by an affiliated entity (e.g., parent company, sister subsidiary), the accounting in standalone financial statements of that entity should generally follow the "multiemployer" guidance in ASC 715-80. This guidance also applies to other affiliated entities in addition to parent/subsidiary relationships. It is not uncommon for actuaries to perform allocations of plan obligations and assets to the various subsidiaries participating in a parent-sponsored plan. Based on this allocation, it might appear that the subsidiary has sufficient information to account for its participation in the plan following the single-employer guidance of ASC 715. However, based on the guidance in ASC 715-30-55-63 and ASC 715-30-55-64, the subsidiary should generally continue to follow the multiemployer guidance in ASC 715-80.
The multiemployer guidance differs significantly from the traditional "single employer" accounting guidance in ASC 715. Under multiemployer accounting, an employer would typically recognize expense based on the required contribution to the plan for the period, and the employer would only recognize a liability to the extent that the required contribution had not been paid at the end of the period. When the employers are affiliated entities, other expense allocation approaches may also be appropriate, such as an allocation of parent expense based on headcount, total salaries, etc. When preparing carve-out financial statements, the allocation of costs should be reasonable. The amount of expense recognized in the carve-out financial statements may be different from any required contributions. Refer to SAB Topic 1.B for further discussion of allocation of costs in carve-out financial statements.
A subsidiary participating in its parent's single employer plan or a non-profit agency participating in its national organization's plan is not required to provide the multiemployer plan disclosures described in FSP 13. Instead, the subsidiary/non-profit agency is required only to disclose the amount of contributions to the plan and to disclose the name of the plan.
Some pension plans may be structured as master trust arrangements in which the master trust is sponsored by the parent company and the underlying assets are legally segregated in sub-trusts by subsidiary. Such arrangements may in fact be "multiple-employer" plans (as opposed to "multiemployer" plans) and, if so, may be accounted for as separate defined benefit plans under ASC 715.
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