Pensions and other postemployment benefits

A reporting entity should also provide a sensitivity analysis of the healthcare cost trend rate. This includes disclosing the effect of a one percentage point increase and decrease in the assumed health care cost trend rates on the sum of service cost and interest cost components of the net periodic benefit costs, and on the benefit obligation. This disclosure will no longer be required after adoption of ASU 2018-14.

Medicare Prescription Drug, Improvement and Modernization Act of 2003

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 authorized Medicare to provide prescription drug benefits to retirees. The federal government makes subsidy payments to reporting entities that sponsor postretirement benefit plans under which Medicare-eligible retirees receive prescription drug benefits that are “actuarially equivalent” to the prescription drug benefits provided under Medicare. This prescription drug benefit program is commonly referred to as Medicare Part D.

ASC 715-60-50 provides guidance on disclosing the effects of the subsidy by a reporting entity that offers postretirement prescription drug coverage. In the first period that a reporting entity includes the effects of the subsidy when measuring its APBO and net periodic benefit cost, it should disclose the following in both interim and annual financial statements:

• The decrease in the APBO for the subsidy that relates to benefits attributed to past service
• The effect of the subsidy on the measurement of the current period’s net periodic benefit cost, including the reduction in service cost and interest cost from the effects of the subsidy and the amortization of the gain for the reduction in the APBO

When providing the expected benefit payment disclosures, the reporting entity should provide the gross benefit payments (paid and expected), including prescription drug benefits, and, separately, the gross amount of the subsidy receipts (received and expected).

ASC 715-60-50-6 provides guidance for reporting entities that are unable to determine whether the benefits under its plan are actuarially equivalent to the Medicare Part D benefit. Those reporting entities should disclose (1) the existence of the Medicare Prescription Drug, Improvement, and Modernization Act, and (2) that its measures of the benefit obligation and net periodic benefit cost do not reflect any amounts associated with the subsidy, since it cannot conclude on whether the benefit is actuarially equivalent to Medicare Part D.

13.3.6.9 Significant events

Reporting entities may take actions that significantly affect their defined benefit plans. Appropriate disclosure about the nature and impact of these events is required.

Curtailments and settlements

As discussed in ASC 715-30-35-63B, two common significant events are curtailments and settlements. A curtailment is defined in ASC 715-30-20 as an event that significantly reduces the expected years of service of current employees or eliminates the accrual of benefits for future service for a significant number of employees. A settlement is defined in ASC 715-30-20 as an event that relieves the employer of the primary responsibility for the obligation to some or all participants, eliminates significant risks related to the obligation and the assets used to settle it, and is irrevocable. In these situations, as

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