Fully benefit-responsive investment contracts are measured at contract value. An investment contract is considered fully benefit-responsive if all of the criteria in ASC 962-325-20 are met for that contract, analyzed on an individual basis. The criteria are:

ASC 962-205-45-6 requires the statement of changes in net assets available for benefits to be prepared on a basis that reflects income credited to participants in the plan and net appreciation or depreciation in the fair value of only those investment contracts that are not deemed to be fully benefit responsive.

As outlined in ASC 962-325-50-3, defined-contribution plans, including both health and welfare, and pension plans are required to disclose the following in connection with fully benefit-responsive investment contracts, in the aggregate:

A separate account is an account established by an insurance entity solely for the purpose of investing assets of one or more employee benefit plans. The assets of a separate account are assets of the insurance company but are not commingled with the insurance company's general assets.

A separate account in which several plans participate is generally referred to as a pooled separate account, with each plan's share of a pooled separate account determined on a participation-unit or variable-unit basis.

A separate account in which only one plan participates is generally referred to as an individual separate account or as a separate-separate account. These assets are not commingled with assets of the insurer or other plan sponsors.

Separate accounts that calculate a net asset value (NAV) per participation unit are valued under ASC 820-10-15-4 through ASC 820-10-15-5. For separate accounts that do not calculate NAV per share, for purposes of determining valuation, it is appropriate to look through to the underlying investments in the account. For some separate accounts, typically those providing a guaranteed rate of return, contract value may be the best evidence of fair value.

Plans may invest in an investment contract issued by an insurance company that will generate returns based on the performance of underlying or reference assets (e.g., pooled accounts). In these situations, plan management may determine that the appropriate unit of account is the investment contract rather than the underlying investments. Alternatively, some investment contracts require that the underlying assets be maintained in a "separate account" of the insurance company, and sometimes plan management has some involvement in investment decisions relating to the separate account. These assets are generally not commingled with assets of the insurer or other plan sponsors, and while the insurer legally owns the assets, they may not be available to its general creditors in bankruptcy. Accordingly, it may be appropriate to look through the separate account to use the underlying investments as the unit of account.

A master trust holds assets of more than one plan sponsored by one employer or by a group of employers under common control. A master trust is a vehicle that receives cash, invests it, liquidates investments, and has neither rights to contributions nor obligations to pay benefits, as these rights and obligations belong to the plans that participate in the master trust. Therefore, receivables (and payables) that relate specifically to the master trust (such as an interest receivable for bonds in the master trust) should be reported at the master trust level and not the plan level. Similarly, receivables (and payables) that relate specifically to the underlying plans in the master trust (such as a contribution receivable) should be reported at the plan level, and not at the master trust level. Accrued expenses should receive similar treatment, with a facts and circumstances analysis to determine whether an item relates to the master trust or the underlying plans, thereby determining its presentation in the financial statements. Generally, investment-related expenses (e.g., trustee fees, custodial fees) are recorded at the master trust level and specific plan-related expenses (e.g., actuary fees, legal fees) are recorded at the plan level.

Plans participating in a master trust are required to disclose the percentage of the plan’s interest in each type of investment, other assets, and liabilities of the master trust.

Securities lending is the temporary loan of a security from one financial institution to another to earn additional income. Plans that engage in securities lending should present the assets received in return for the securities (collateral), as well as the exchanged securities, on the statement of net assets available for benefits. The exchanged securities, as well as the assets received for them (if an investment), should be reported on the supplemental schedule of assets (held at end of year) required by ERISA with the appropriate disclosures. A liability should be recorded on the statement of net assets available for benefits for the return of the collateral. See PEB 9.10.1 for discussion of supplemental schedules required by ERISA.

For securities lending arrangements within a master trust, note disclosure of the master trust investments should include the collateral received, as well as an offsetting liability for the return of the collateral. Since plan investments in a master trust are recorded as a single line item on the plan’s statements of net assets, securities lending in the master trust would not be reflected on the face of the plan’s financial statements.

See AAG-EBP Chapter 8 and ASC 860 for additional information regarding securities lending.