Multi-Employer Pension Plan - Monthly Contribution Expense
Recording monthly contributions to a multi-employer defined benefit pension plan (union plan) as an expense when the obligation arises per the collective bargaining agreement (CBA).
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Pension Expense - Multi-Employer Plan Contributions | Expense (+) | 1,850,000.00 | - |
| Accrued Multi-Employer Pension Contributions Payable | Liability (+) | - | 1,850,000.00 |
💡 Accountant's Note
Multi-employer plans (MEPs) are collectively bargained DB plans shared among multiple employers — common in construction, trucking, retail food, and healthcare. Unlike single-employer DB plans (where the full PBO and funded status are on the employer's balance sheet), MEP accounting under ASC 715-80 is dramatically simpler: the employer recognizes only its CONTRIBUTION as an expense. There is NO PBO on the balance sheet, NO plan asset, and NO actuarial measurement. The employer's obligation extends only to its contractual contribution rate. However, withdrawal creates a catastrophic liability — the withdrawal liability (see next entry). Required disclosures: plan name, EIN, funding zone status (green/yellow/red), minimum funding improvement plan, surcharges, and whether a financial improvement plan is in effect.
Practitioner & Systems Framework
💻 ERP Architecture
Track MEP contributions by fund (each union pension fund separately), by contribution rate (base rate per hour or per month per covered employee), and by contract expiration date. CBA renegotiation may change contribution rates mid-year. Set up vendor payment records for each union fund's trust. The contribution rate × hours worked calculation must reconcile to payroll records for audit purposes.
⚠️ Audit Flags
Auditors require MEP disclosures per ASC 715-80: certification year zone status (green = > 80% funded, yellow = 65-80%, red = < 65% critically underfunded), whether the employer's contributions represent more than 5% of total plan contributions (triggering enhanced disclosure), any surcharges imposed, and the plan's expiration date. Red-zone plans have imposed surcharges (5% for first year, 10% thereafter) that are often controversial and contested.
📄 Required Documentation
Collective bargaining agreement specifying contribution rates per covered employee hour/month, each pension fund's annual funding notice (Form 5500 green/yellow/red zone certification), contribution remittance records by fund and period, plan identification data (EIN, plan number), surcharge documentation if applicable.
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