- A comparative statement of assets and liabilities at current value at the beginning and end of the year
- A statement of changes in net assets for the most recent year
9.10.1 Supplemental schedules required by ERISA and the DOL
In addition to the financial statements and related disclosures, ERISA and DOL regulations require the disclosure of additional information that is required to be covered by the auditor's report. The additional information, which is described in detail in the instructions to Form 5500, is presented in supplemental schedules as follows:
- Schedule H, line 4a - Schedule of Delinquent Participant Contributions
- Schedule H, line 4i - Schedule of Assets (Held at End of Year)
- Schedule H, line 4i - Schedule of Assets (Acquired and Disposed of Within Year)
- Schedule H, line 4j - Schedule of Reportable Transactions - these are transactions that exceed 3% (if the plans file their annual reports under the statutory method) or 5% (if the plans file their annual reports pursuant to the alternative compliance method prescribed by the DOL) of the fair value of plan assets at the beginning of the year
- Schedule G, Part I - Schedule of Loans or Fixed Income Obligations in Default or Classified as Uncollectible
- Schedule G, Part II - Schedule of Leases in Default or Classified as Uncollectible
- Schedule G, Part III - Nonexempt Transactions
The instructions to the Form 5500 and information in AAG-EBP Appendix A, Exhibit A-1, provide detailed guidance regarding the information required to be disclosed in each of these schedules.
9.10.2 Reporting gains and losses on benefit plan investments
The reporting of investment gains and losses under GAAP differs from the reporting under ERISA. ERISA requires the use of the current value method (also sometimes referred to as the revalued cost method) for reporting realized and unrealized gains and losses on Form 5500. Under this method, realized gains and losses are calculated as sales proceeds less current value at the beginning of the year, or acquisition cost if acquired during the year. Unrealized gains and losses are calculated as the current value of the investment held at the end of the year less its current value at the beginning of the year, or acquisition cost if acquired during the year. Essentially, the measure of reporting gains and losses focuses only on the change in value during the current year.
For GAAP purposes, the minimum disclosure required by ASC 960, ASC 962, and ASC 965 is the net appreciation or depreciation in the fair value of investments, which includes realized gains and losses on investments bought and sold during the year measured in relation to their original acquisition cost. Thus, the use of beginning-of-the-year data under ERISA to compute realized gains and losses is not in accordance with GAAP. As such, a plan should not separately disclose realized gains or losses in the financial statements computed under the current value (ERISA) method. Accordingly, to alleviate the audit and financial reporting implications of presenting captions and amounts in the financial statements that are not in conformity with GAAP, plans may display, in their statement of changes in net assets available for benefits, only the net appreciation (depreciation) in the fair value of investments, which would include realized gains and losses on investments bought and sold during the year.
A plan could present its "realized gains or losses" computed on the current value basis, if the plan:
- Titles the amount "excess (deficiency) of net proceeds over market value at beginning of year," rather than the caption "realized gains or losses," and
- Indicates, in the summary of significant accounting policies footnote, the basis of the calculation of this amount.
9.10.3 Reconciliation between the financial statements and Form 5500
Under DOL regulations, any difference between Form 5500 and the financial statements must be disclosed and reconciled (e.g., the net assets in the financial statements will be higher than the net assets reported under ERISA if there are any liabilities for amounts due the participant, see Figure PEB 9-1).
In lieu of a reconciliation of the difference in how gains and losses are reported (as described in PEB 9.10.2), however, the DOL will generally allow the plan to present in the statement of changes in net assets the net appreciation (depreciation) in the fair value of investments, consisting of the realized gains (or losses) and the unrealized appreciation (depreciation) on those investments, as long as that form of presentation is disclosed in a note to the financial statements.
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- Table of contents
- 9.10 ERISA reporting requirements
