Simplification of employee benefit plan accounting
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One of the largest challenges that contractors face is finding a quality workforce and being able to retain them. Offering an employee benefit plan is one of many ways to attract and retain valuable employees, and, in addition, provides tax benefits and deferrals to owners as well as participants.
Generally, contractors who provide employee benefit plans with 100 or more participants are required by Federal law to have an audit as part of their obligation to file an annual Form 5500 return with the Department of Labor. Some plans with fewer than 100 participants may also be required to have an audit, therefore, owners should consult with their plan attorney, advisor or accountant. The audit must be completed by an independent, certified public accountant who has experience in auditing employee benefit plans.
Employee benefit plan audits are subject to certain financial reporting requirements as provided by the Financial Accounting Standards Board (FASB). In an effort to reduce the complexity of United States accounting rules, in July 2015, the FASB issued Accounting Standards Update 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965), to simplify employee benefit plan accounting and to add value to users of the plan financial statements, including the plan participants as well as the Department of Labor. The updates, which were developed by the Emerging Issues Task Force (EITF), focus on simplifying the measurement of fully-benefit responsive investment contracts, simplifying certain plan investment disclosures, and allowing employee benefit plans with fiscal year ends that do not coincide with the end of a calendar month to choose an alternative way to measure investments and investment related accounts.
ASU 2015-12 is effective for fiscal years beginning after Dec. 15, 2015. Early adoption is permitted.