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Business and Policy Areas
Business and Policy Areas
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FASB Issues Proposal to Improve Postretirement Plan Accounting

April 3, 2006

The Financial Accounting Standars Board issued an Exposure Draft that would improve financial reporting by requiring employers to recognize the overfunded or underfunded positions of defined benefit postretirement plans, including pension plans, in their balance sheets. The proposal would also require that employers measure plan assets and obligations as of the date of their financial statements.

The draft applies to plan sponsors that are public and private companies and nongovernmental not-for-profit organizations. It results from the first phase of a comprehensive project to reconsider guidance in Statement No. 87, "Employers’ Accounting for Pensions," and Statement No. 106, "Employers’ Accounting for Postretirement Benefits Other Than Pensions."  A second, broader phase will comprehensively address remaining issues. FASB expects to collaborate with the International Accounting Standards Board on that phase.


Current accounting standards do not provide complete information about postretirement benefit obligations, allowing  an employer to recognize an asset or liability in its balance sheet that can differ from its overfunded or underfunded positions. Consequently, incomplete reporting results because existing standards allow delayed recognition of certain changes in plan assets and obligations that affect the costs of providing such benefits.

The proposed changes, other than the requirement to measure plan assets and obligations as of the balance sheet date, would be effective for fiscal years ending after December 15, 2007, for non-public entities, including independent colleges and universities.

FASB is seeking written comments on the proposal by May 31. NACUBO encourages members to comment directly to FASB and copy NACUBO.

NACUBO contact: Sue Menditto, director, accounting policy.