Question

The FASB ASC addresses the accounting and reporting for post retirement health benefits for entities in the coal industry affected by the Coal Industry Retiree Health Benefit Act of 1992. Find, cite, and copy the FASB ASC paragraphs that discuss this issue.

Answer 1

EITF ABSTRACTS
Issue No. 92-13
Title: Accounting for Estimated Payments in Connection with the Coal Industry Retiree Health
Benefit Act of 1992
Date Discussed: November 19, 1992
References: FASB Statement No. 5, Accounting for Contingencies
FASB Statement No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions

ISSUE
Current and projected operating deficits of certain benefit trusts established by the United Mine
Workers of America (UMWA) and the Bituminous Coal Operators' Association, Inc. (BCOA),
prompted the Coal Industry Retiree Health Benefit Act of 1992 (the Act). The Act creates a new
"multiemployer benefit plan" called the United Mine Workers of America Combined Benefit
Fund (the Combined Fund), which will provide medical and death benefits to all beneficiaries of
certain earlier trusts who were actually receiving benefits as of July 20, 1992. In 1993, the
Combined Fund will begin paying those beneficiaries their medical and death benefits. The Act
provides for the assignment of beneficiaries to former employers and the allocation of any
unassigned beneficiaries (referred to as orphans) to enterprises using a formula included in the
legislation. The Act requires that responsibility for funding those payments be assigned to
enterprises (or persons related to the enterprises) that had been signatories to a coal wage
agreement. An enterprise's annual cost of benefits will be based on the number of beneficiaries
assigned to it plus a percentage of the cost of unassigned beneficiaries, which is a function of the
number of orphans times the per-beneficiary premium.
The issue is how an enterprise should account for the payments that are required by the Act.

EITF DISCUSSION
The Task Force discussed whether the Combined Fund created by the Act was in substance a
multiemployer benefit plan. Some Task Force members said that the obligation under the Act
had characteristics of a tax. A majority of Task Force members expressed the view that the
Combined Fund created by the Act was similar to a multiemployer plan, while others noted that
the effect of the Act was similar to a plan withdrawal. The Task Force also discussed whether
the entire obligation under the Act should be considered or only the incremental liability
imposed by the Act.
The Task Force reached a consensus that enterprises that currently have operations in the coal
industry should account for their obligation under the Act either as participation in a
multiemployer plan or a liability imposed by the Act. Enterprises that currently have operations
in the coal industry that decide to account for their obligation as a liability and enterprises that no
longer have operations in the coal industry should account for their entire obligation under the
Act as a loss in accordance with Statement 5.
The Task Force also reached a consensus that if an enterprise accounts for its obligation under
the Act as a loss in accordance with Statement 5, the estimated loss should be reported as an
extraordinary item.
An FASB staff representative stated that the obligation imposed by the Act should not be
included in the cumulative effect of a change in accounting principle when Statement 106 is
adopted because the obligation under the Act resulted from legislation and not from a change to
the accrual method of accounting for postretirement benefit costs.
In addition, the Task Force reached a consensus that enterprises should disclose the impact of the
Act, including the estimated amount of their total obligation and the method of accounting
adopted.

STATUS
No further EITF discussion is planned.