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Board of Governors of the Federal Reserve System
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Financial Accounting Manual

Appendix F. Pension



F.1 Employer Accounting for the Retirement Plan for the Employees of the Federal Reserve System

The purpose of this memorandum 1 is to document the considerations and conclusions relevant to determining how the Federal Reserve's financial statements should reflect the employer's assets, liabilities, and costs related to the provision of retiree benefits from the Retirement Plan for Employees of the Federal Reserve System (System Plan).2

The System employers account for their pension obligations in manner a consistent with U.S. generally accepted accounting principles (GAAP). When FASB ASC Topic 715-30; formerly SFAS No. 87, was implemented in 1987, employer accounting for pension benefits expanded to reflect the employer's financial interest for providing pension benefits net of assets held in separate pension entities. Because the System Plan provides for the payment of benefits to retirees from the assets of the plan without regard to the source of the funding, each employer's interest in the plan could not be computed and accounted for as separate financial positions. Instead, each employer's position is computed at a System level and reported on the financial statements of the Federal Reserve Bank of New York. We believe this treatment is the most appropriate and consistent with the intent of GAAP. This interpretation, however, is not clearly contemplated by the applicable accounting standards in that it arises from the unique structure of the Federal Reserve System. That is, the System employers are legally independent and not commonly owned and controlled, yet cooperate financially in the provision of pension benefits in a manner that would not normally exist among independent entities.

The following explains the treatment of the System Plan as a single employer plan reflected on the FRBNY's financial statements.

Single/Multi-employer Accounting

Much of the authoritative accounting literature on employer pension plan accounting focuses on whether the plan is characterized as a single-employer or a multi-employer plan. Essentially, the resources of single employer plans are incorporated into the employer's net pension asset/liability, the resources of multi-employer plans are not. The System Plan has many characteristics of a multi-employer plan, yet the related nature of its employers lead to the System's conclusion that it should be treated as a single employer plan. The citations/definitions discussed below present definitions of each term from key sources.

  1. FASB ASC Topic 715-30; formerly SFAS No. 87 (issued December 1985):

    • Single-employer plan - A pension plan that is maintained by one employer. The term may also be used to describe a plan that is maintained by related parties such as a parent and its subsidiaries.
    • Multiemployer plan - A pension plan to which two or more unrelated employers contribute, usually pursuant to one or more collective bargaining agreements. A characteristic of multiemployer plans is that assets contributed by one participating employer may be used to provide benefits to employees of other participating employers since assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer.
  2. FASB ASC Topic 960-10; formerly the AICPA Accounting and Audit Guide, Employee Benefit Plans (Employee Benefit Guide), specifies that administration is the most distinguishing characteristic between single employer plans and multiemployer plans. In a single employer plan, the employer is the plan sponsor. Multiemployer plans are normally negotiated and established pursuant to collective bargaining agreements between an associated group of employers, such as those whose employees are represented by a specific union, and the plan sponsor of a multiemployer plan is a joint employer, union committee, or board.
  3. FASB ASC Topic 960-10; formerly question 86 & 87 of FASB's Special Report, A Guidance to Implementation of Statement 87 of Employers' Accounting for Pension (issued December 1990) addresses the reporting-entity question for affiliated not-for-profit entities. The conclusion of this discussion is that "parent" entity within the group may account for a plan as a single employer plan in its financial statement, while all other entities in the group account for the plan as a multiemployer plan.

A distinguishing characteristic of multiemployer plans is that assets contributed by one employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. In this respect, the System Plan is similar to a multiemployer plan, as the assets are not divisible among the Banks, BOG, and OEB, and all assets are available for benefits to employees of each entity. Another distinguishing characteristic, however, is the nature of the relationship among the entities whose employees participate in a plan. The multiemployer definitions frequently refer to collective bargaining relationships, implying that the employers are unrelated parties. If the employers are related parties (for example, through equity interest, management control, or financial control), then the plan would generally be considered a single employer plan. When the entities are unrelated parties, the plan would typically be considered a multiemployer plan.

Although the Banks, BOG, and the OEB are not related through equity or other beneficial ownership, there is strong evidence that they are related parties for plan aggregation purposes. For example,

  1. the BOG appoints three members of each Bank's board of directors,
  2. the OEB's oversight committee is composed of Bank and BOG representatives,
  3. the Banks are the sole funding source for the BOG,
  4. the Banks and the BOG are the funding source for the OEB,
  5. the BOG and five Bank presidents compose the Federal Open Market Committee, which directs the investments that provide substantially all of the Banks' income, and
  6. the Banks rely on each othe. for the provision of various operational and administrative functions.

Based on the discussions above, the System Plan most closely resembles a single employer plan with characteristics of a multiemployer plan. Accordingly, the most appropriate treatment would be single plan accounting on the financial statements of the most appropriate employer.

Determining the Reporting Employer

The assets, liabilities, and costs related to the System Plan are recorded by the FRBNY. This decision was based on 1) the conclusion that it was appropriate for one entity among the participating employers to report the System Plan, 2) that the System Plan should be reported by a Reserve Bank so that the income/costs associated with the pension benefits would be incorporated into the Reserve Banks' distribution of excess earnings to the U.S. Treasury, 3) that Bank employees comprise the overwhelming majority of participants, and 4) the FRBNY has the largest employee group among the Banks and has administrative responsibilities for the System Plan through its relationship with the OEB.

FRBNY remains the most appropriate choice to record and disclose the System Plan. As of January 1, 2008, the Banks account for 40,758 of the 43,799 active and inactive participants (approximately 93%). FRBNY continues to have the largest group of active and inactive participants among the Banks. By reporting the Plan assets and liabilities in FRBNY's financial statements, the effect of recording the BOG and OEB-related amounts are included on the Banks' combined financial statements.

Accounting and Disclosure

FRBNY accounts for the System Plan in a manner that is consistent with the accounting for a single employer plan. System Plan assets, liabilities, costs and all required footnote disclosures are reflected in its financial statements, and net periodic pension costs are presented as a component of its net income from operations. Each of the other participating employers account for the System Plan in a manner similar to a multiple employer plan; no disclosure of plan assets, liabilities, and costs would be made in the financial statements of the other eleven Banks, BOG, and OEB as discussed earlier.

Limited disclosure regarding the reporting entity of the System Plan is required. Though the characterization as a single or multiemployer plan affects the accounting and disclosure, there is no requirement to state specifically that a plan is being accounted for as either a single or multiemployer plan. Financial statement disclosures provide users information about the participating employers and FRBNY's role, on behalf of the System, in recognizing the net asset/liability and costs and that the other participating employers do not reimburse FRBNY for the Plan costs. In addition, when they are made, FRBNY discloses the amount of contributions.

F.1.1 Employer Accounting for the Consumer Financial Protection Bureau Employee Participation in the Retirement Plan for the Employees of the Federal Reserve System

The purpose of this memorandum is to document any accounting implications of CFPB employee participation in the System plan.3 The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) allows CFPB employees to participate in the System plan.4 The FRBNY accounts for the System plan as a single-employer plan (see F.1 Employer Accounting for the Retirement Plan for the Employees of the Federal Reserve System). The CFPB employee participation in the System plan does not change the single-employer accounting treatment for the System plan.5

The authoritative accounting literature on employer pension plan accounting focuses on whether a plan is a single-, multi-, or multiple-employer plan (see ASC Topic 715-30). The accounting for single- and multi- employer plans is discussed in F.1. ASC 715-30 defines a multiple-employer plan as one that is maintained by more than one unrelated employer with plan assets that are severable and maintained in separate accounts for each employer even though the assets are pooled together for investment purposes and to reduce administration costs. Separating the assets allows for the participating employers to have different benefit formulas and to reserve each employer's assets to provide benefits to only its respective employee benefits. Under a multiple-employer plan, therefore, each employer accounts for its respective interest in the plan as a single-employer plan, and the net pension asset/liability of all participating employers is not reported. The System plan is not a multiple-employer plan because the invested assets are not maintained in separate accounts.

With CFPB employee participation, the System plan will continue to have nonseverable assets; all System plan assets are available for the payment of benefits for all participants (Reserve Banks, Board, OEB, and CFPB) and will not be invested separately. Although the CFPB is not related to the Reserve Banks, Board, and OEB through equity or management control, the following factors indicate that it is a related entity for employer System plan accounting purposes:

  • The legal definition of the CFPB in the DFA as an independent agency established in the Federal Reserve System 6
  • The provisions of the DFA that define the CFPB as the "same employer as the Federal Reserve System"7
  • The requirement that the Board fund the operations of the CFPB.

In addition to evaluating whether the participating employers are related parties for employer accounting purposes, the administration of the plan is a strong indicator in determining if the plan is a single-, multi-, or multiple-employer plan. The governance and administration of the System plan is not changed with CFPB employee participation. The DFA specifically states that the System plan should continue to be administered as a single-employer plan and that the CFPB does not have responsibility or authority to make any plan amendments, administer an existing plan, or ensure the System plan complies with applicable laws.

System plan employer contributions are currently determined annually at an aggregate level and the employer funding may be allocated among the participating entities on other than a pro rata basis. FRBNY makes employer contributions to the System plan on behalf of all Reserve Banks, the Board, and OEB. DFA requires that the CFPB contribute funds to the System plan for each CFPB employee participating in the System plan.8 The contribution formula for CFPB employees electing to participate is based on the Federal Employee Retirement System contribution formula (not on the cost of benefits to be provided to CFPB beneficiaries at retirement).9 The addition of CFPB employer contributions to the System plan funding will not change the approach to determine overall employer contributions - they will continue to be determined at an aggregate level based on aggregate plan assets and plan obligations. In addition, because the CFPB contribution formula is specifically required by the DFA and not based on a benefit formula or linked to the participating employee benefits, the amount funded by each employer does not indicate that the assets are severable. The System plan's funded status for each participating employer is not determinable because the plan assets are not severable, and they will not be tracked separately.10


1. This appendix is based on a memo issued by FRB Financial Accounting, on March 10, 2008. Return to text

2. The System Plan is a defined benefit pension plan that covers employees of the twelve Federal Reserve Banks (Banks), the Board of Governors (BOG), and the Office of Employee Benefits of the Federal Reserve Employee Benefits System (OEB). Return to text

3. The DFA refers to the Bureau as the "Bureau of Consumer Financial Protection". Return to text

4. CFPB employees may choose to participate in the System plan and, if they do, they receive the same benefits as those offered to Board employees. Return to text

5. This appendix is based on a memo issued by Brenda L. Richards, Manager, RBOPS Accounting Policy and Operations, on March 16, 2011. Return to text

6. 12 U.S.C. 5491(a)  Return to text

7. 12 U.S.C. 5584(i)(1)(C)(v) This statement was included in the act for purposes of subsections (b), (c), (m), and (o) of section 414 of the Internal Revenue Code of 1986 (26 U.S.C. 414). Return to text

8. 12 U.S.C. 5584(i)(1)(A)(iv)  Return to text

9. 12 U.S.C. 5584(i)(1)(A)(iv). DFA also requires that the CFPB contribute funds for employees that have transferred from the Federal Reserve System to the CFPB (12 U.S.C. 5584(i)(1)(C)(iv)). Also, DFA states that the Board can require the CFPB to supplement the contributions that it provides with additional funding. Return to text

10. Any internal estimation of the funded status or funding requirement by participating employer is not considered relevant to the treatment as a single-employer plan. Return to text

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Last update: February 18, 2014