ASC 960 sets the financial reporting requirements for defined benefit plans that report as standalone entities, and it centers on three presentations: a statement of net assets available for benefits, a statement of changes in those net assets, and information about the actuarial present value of accumulated plan benefits. Investments are generally carried at fair value, the benefit obligation is calculated using the plan’s benefit formula and current salary levels, and the notes carry a defined set of disclosures about the plan, its funding policy, and the assumptions behind the actuarial figures. What follows walks through each of those requirements in the order a preparer or reviewer actually works through them.
The Three Required Financial Presentations
Everything in an ASC 960 report hangs on three pieces of information. Each answers a different question about the plan.
The Statement of Net Assets Available for Benefits is the plan’s balance sheet. It lists investments, receivables, and cash on one side; liabilities such as accrued expenses and benefits payable on the other. The difference is the net assets available to pay participants. ERISA requires the same information in parallel, calling for “a statement of assets and liabilities, and a statement of changes in net assets available for plan benefits.”1Office of the Law Revision Counsel. 29 USC 1023 – Annual Reports
The Statement of Changes in Net Assets Available for Benefits explains why that net assets figure moved from one year-end to the next. The standard requires the statement to show all significant sources of change. On the inflow side that means net investment appreciation or depreciation (realized and unrealized combined), investment income such as interest and dividends reported separately from appreciation, employer contributions with cash and noncash contributions shown separately and noncash items recorded at fair value, and participant contributions when the plan requires or permits them. On the outflow side it means benefit payments to retirees and separated employees plus administrative expenses such as trustee, recordkeeping, and actuarial fees. Net investment appreciation or depreciation is usually the largest single driver in a given year.
The third presentation covers the Actuarial Present Value of Accumulated Plan Benefits, sometimes shortened to APVAPB. This is the plan’s estimate of the present-value cost, in today’s dollars, of paying every benefit participants have already earned. It can be presented either as a separate statement or in the notes. The benefit information date can be the beginning or end of the plan year, though year-end is preferable.
The net assets number alone tells you nothing about whether the plan can meet its promises. Only when you set net assets against the accumulated plan benefits do you see funded status.
How Plan Investments Are Valued
ASC 960 requires nearly all plan investments to be reported at fair value, defined as the price the plan would receive selling the asset in an orderly transaction. The measurement follows the three-level hierarchy from ASC 820:
- Level 1 uses quoted prices for identical assets in active markets, such as publicly traded stocks and mutual fund shares.
- Level 2 uses observable inputs that are not direct quoted prices, including prices for similar assets, interest rates, or yield curves corroborated by market data.
- Level 3 uses unobservable inputs and significant judgment, appropriate for private equity, certain real estate, and thinly traded securities.
The notes must describe the valuation techniques and inputs used for each level, though defined benefit plans are exempt from some of ASC 820’s more granular disaggregation requirements. For investments in common-collective trusts and pooled funds, plans often use net asset value per share as a practical expedient. Historical cost is neither required nor prohibited as a supplemental disclosure.
The Two Contract-Value Exceptions
Two categories sit outside the fair value rule. Insurance contracts held by the plan are reported at the value determined under the contract terms, consistent with Form 5500 reporting. Fully benefit-responsive investment contracts, which are guaranteed contracts between the plan and an issuer such as an insurance company or bank, are reported at contract value. A fully benefit-responsive investment contract guarantees a predetermined interest rate and return of principal, so contract value reflects what the plan will actually receive. After FASB simplified these rules with ASU 2015-12, contract value became the only required measurement for these contracts, though plans still disclose their nature and risks.
Calculating Accumulated Plan Benefits
The accumulated benefit figure is the most consequential and the most assumption-driven number in the statements. ASC 960 requires the calculation to use the benefit formula in the plan document, crediting a unit of benefit for each period of employee service, and to use current salary levels. Future salary increases are excluded unless the benefit formula itself is based on projected pay.
That current-pay rule is the main line dividing ASC 960 from ASC 715, the employer’s pension accounting standard, where the projected benefit obligation incorporates expected future salary growth. The same plan can therefore show very different obligations depending on which framework is applied.
The total must be split into vested benefits, which the participant keeps even after leaving the employer, and non-vested benefits, which would be forfeited if the participant left before satisfying the plan’s vesting schedule. Vested amounts represent a firm obligation; non-vested amounts depend on whether participants stay long enough to earn them.
The Discount Rate
The discount rate is the single most influential assumption in the calculation. ASC 960 permits the rate to reflect the expected rate of return on plan assets, which typically produces a higher rate and a lower present value than the settlement-based rates required under ASC 715 or the segment rates used for minimum funding under IRC Section 430.2Office of the Law Revision Counsel. 26 USC 430 – Minimum Funding Standards for Single-Employer Defined Benefit Pension Plans This is one reason the same plan’s funded percentage can look different across accounting and regulatory frameworks.
Demographic Assumptions
Beyond the discount rate, the actuary needs assumptions about when and how benefits will be paid. Mortality is critical for a promise to pay someone for life. The IRS publishes updated static mortality tables each year for minimum funding valuations. IRS Notice 2025-40 provides separate male and female mortality rates for 2026, along with a blended unisex table used for minimum lump-sum distributions.3Internal Revenue Service. Updated Static Mortality Tables for Defined Benefit Pension Plans for 2026 (Notice 2025-40) These tables are prescribed for funding under IRC Section 430, but they commonly serve as a starting point for ASC 960 valuations with adjustments for plan-specific experience.
Other demographic assumptions include employee turnover rates, disability rates, and expected retirement age. All assumptions must reflect the plan’s own population and anticipated experience rather than generic industry benchmarks.
Reconciliation From Year to Year
The financial statements must include a reconciliation showing how the accumulated plan benefits changed from the beginning of the period to the end. That reconciliation identifies the effects of benefit payments made, new benefits earned, plan amendments that changed the benefit formula, and any changes in actuarial assumptions. If the plan adopts a new mortality table or lowers its discount rate, the reconciliation quantifies the impact on the total obligation.
Required Note Disclosures
The notes carry nearly as much information as the statements themselves. ASC 960 and ERISA together require a specific set of disclosures so a reader can interpret the numbers.
- A plan description covering eligibility, vesting schedule, and the benefit formula, along with any significant amendments during the period and their effect on benefits.
- The funding policy, including whether the employer funds at the minimum required level, targets a specific funded percentage, or uses another approach, and any changes to that policy during the year.1Office of the Law Revision Counsel. 29 USC 1023 – Annual Reports
- Actuarial methods and assumptions, itemizing the discount rate, mortality tables, and other material inputs, with enough detail for a knowledgeable reader to understand the basis for the present-value calculation.
- Investment valuation policies, including how fair value is determined for each major investment category and which assets sit in Level 1, 2, and 3 of the hierarchy.
- Plan termination priorities, describing in general terms how assets would be allocated if the plan terminated.
- Tax status, indicating whether the plan has received a favorable determination or opinion letter from the IRS.
Party-in-Interest Transaction Disclosures
Defined benefit plans routinely transact with related parties. The sponsoring employer contributes cash and securities, the trustee charges fees, and participants may take loans. ERISA calls these “party-in-interest” transactions and prohibits most of them unless a specific statutory exemption applies. The notes must describe any material transactions with known parties in interest, including the nature and dollar amount of each.1Office of the Law Revision Counsel. 29 USC 1023 – Annual Reports
Common exempted transactions include participant loans, payments for services necessary to operate the plan at reasonable compensation, and deposits with regulated financial institutions. These still need to be identified in the financial statements, but they do not trigger prohibited-transaction penalties. Transactions that fall outside the exemptions must also be disclosed on the supplemental Form 5500 schedules (Schedule H or G), and reporting them improperly can produce a modified audit opinion on those schedules.
ASC 960 Versus ASC 715
ASC 960 applies to the plan itself as a reporting entity. When the employer that sponsors the plan prepares its own financial statements, the pension figures there follow ASC 715, not ASC 960. The two frameworks measure different things: ASC 715 uses projected future salaries and a settlement-based discount rate; ASC 960 uses current salaries and permits an expected-return discount rate. A plan can look better funded on its own statements than on the sponsor’s, and neither number is wrong. They are answers to different questions.
Where the Statements Go
ASC 960 financial statements do not sit on a shelf. They feed the plan’s annual Form 5500 filing with the Department of Labor, which also serves the IRS and the Pension Benefit Guaranty Corporation. Plans with 100 or more participants at the beginning of the plan year file as large plans and must attach audited financial statements prepared by an independent qualified public accountant. The accountant opines on whether the statements are presented fairly in conformity with generally accepted accounting principles.1Office of the Law Revision Counsel. 29 USC 1023 – Annual Reports
When plan assets are held by a bank, trust company, or insurance carrier regulated by a state or federal agency, the plan can elect an ERISA Section 103(a)(3)(C) audit (previously known as a limited scope audit). Under that election, the auditor does not opine on the investment information certified as accurate by the qualified institution, but still performs procedures over the certified information and fully audits contributions, benefit payments, administrative expenses, and the disclosures not covered by the certification. Getting the ASC 960 statements right is the front end of that entire chain, and the assumptions and disclosures decisions made during the accounting work carry straight through to what the auditor reports and what regulators see.