| Dear Center Members: |
| This alert contains information about a recently issued exposure draft of proposed guidance related to defined contribution plan employee and related employer match contributions receivable. |
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Exposure Draft of Proposed Guidance Related to Defined Contribution Plan Employee and Related Employer Match Contributions Receivable
The AICPA's Financial Reporting Executive Committee (FinREC) has issued an exposure draft of proposed guidance to be included in the AICPA Audit and Accounting Guide, Employee Benefit Plans, (Guide) related to employee and the related employer matching contributions receivable in a single employer defined contribution plan.
There is diversity in practice with respect to whether a contribution receivable should be accrued for employee and the employer’s related matching contribution, if any, in pay periods in which amounts have been earned by the employee but have not yet been withheld from employee compensation (for example, for a calendar year plan, the paycheck and withholdings for the last week of December occurs in January of the following year). Some plans use the ERISA definition of plan assets to determine whether an accrual should be made based on when amounts have been withheld from employee compensation while others consider whether a formal commitment exists in determining whether an accrual is appropriate based on compensation earned.
The proposed Guide revision would clarify that FinREC believes that a DC plan can elect to recognize the employee and the related employer matching contribution either (1) in the period related to the participant’s service or compensation (even if not yet withheld), or (2) in the period the employee contribution is withheld. Regardless of which accounting policy is established, FinREC believes that the DC plan’s accounting policy with respect to recognizing employee contributions receivable and the related employer matching contributions should be applied on a consistent basis and the DC plan should consider whether it is a significant accounting policy that should be disclosed in the notes to the financial statements.
We are looking for your informal feedback on this proposed guidance. All comments will be kept confidential and will not be posted on the AICPA Web site. If you would like to provide comments, please e-mail them to Sue Hicks at sue.hicks@aicpa-cima.com by July 17, 2023.
Click here to read the exposure draft.
Sincerely,
AICPA Employee Benefit Plans Audit Quality Center |
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