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On November 4, the Financial Accounting Standards Board (FASB) confirmed it would move forward with an accounting change for qualifying Market-Based Cash Balance plans. Once finalized, the change would generally align the pension obligation employers report with the current value of participants’ accounts, removing the artificial volatility that afflicts other defined benefit pension plans. The Board directed staff to prepare the final update for a written vote.
The guidance would apply to annual reporting periods beginning after December 15, 2027, including interim periods within those years. For calendar-year reporters, that means 2028. Employers could adopt the guidance early once the final update is issued.
Prior to this change, standards require projecting benefits at one rate and discounting them at another, which can create swings in the reported obligation that don’t reflect changes in participants’ account balances. The update would use the plan’s assumed interest crediting rate for both calculations, eliminating the mismatch. Read our June analysis for details on how the approach works and which plans qualify.
October Three applauds FASB’s decision to move forward. Accounting that better reflects how these plans work gives employers a clearer picture of the financial implications when they consider a plan designed to help employees build lifetime retirement income.