The Financial Accounting Standards Board (“FASB”) issued an Exposure Draft (the “Draft”) September 1, 2010, proposing changes to U.S. Generally Accepted Accounting Principles (“GAAP”), which, if adopted, would require participating employers in multiemployer pension plans to disclose in their financial statements additional information concerning their obligations to such plans. The Draft would apply to public companies for fiscal years ending after December 15, 2010 and to non-public companies exactly one year later.

Participating employers in multiemployer plans have become increasingly exposed to withdrawal liability risks due to the economic downturn, combined with the stricter funding rules for financially troubled plans added by the Pension Protection Act of 2006 “PPA 2006”). The Draft would require employers to disclose certain information about the plans in which they participate, about the employer’s participation in the plans and about the effect of the employer’s participation on its cash flow.

The Draft would require employers to disclose, in footnotes to their financial statements, such items as the number of multiemployer plans in which they participate, their exposure to significant risks resulting from such participation, how plan participants’ benefits are calculated, whether the employer is represented on the plan’s board of trustees, the financial consequences of the employer’s ceasing contributions to the plan (e.g., potential withdrawal liability) and, for underfunded plans, the impact on the employer of the plan’s adoption of any PPA 2006 funding improvement or funding rehabilitation plan.

Employers’ financial statement also would have to include a narrative describing any unique events occurring in the current contribution period that might affect the comparability of the current period’s data to prior and future periods, the plan’s total assets and liabilities and the employer’s share thereof, any contractual obligations requiring the employer to make minimum levels of contributions, the amount of employer contributions for the current year and the amount of projected contributions for the following year, any major trends in contribution levels and the potential impact on the employer’s financial condition of its withdrawal from the plan or from the plan’s winding up.

In view of the proposed changes, participating employers in multiemployer plans should make certain they can obtain the data needed to provide the required disclosures in time for inclusion in their annual financial statements. If such a procedure does not exist, employers should consult with their professional advisors and with plan representatives to determine how such information will be provided and transmitted to the employer in time to be included in the employer’s annual financial statement.

For example, the Draft would require financial statements to include estimates of current withdrawal liability from plans in which the employer participates. ERISA Section 101(l) allows employers to request from the plan an estimate of withdrawal liability once in every 12-consecutive month period. Plans are only required to provide such information in response to an employer’s written request and have 180 days from receipt of the written request in which to provide the estimate. As a result, if the Draft is adopted as currently written, the entire burden would fall on employers to obtain timely information for its financial statements unless the employer could negotiate with the plan a contractual schedule which would require the plan to annually provide the required data in a timely manner.