Document ID: chunk:federal_register_of_legislation:F2023C00383:front:0:p11
Version: federal_register_of_legislation:F2023C00383
Segment Type: other
Provision Reference: 
Character Range: 27092–29931

plan or to an insurance company, together with investment returns arising from the contributions. In consequence, actuarial risk (that benefits will be less than expected) and investment risk (that assets invested will be insufficient to meet expected benefits) fall, in substance, on the employee.
29 Examples of cases where an entity's obligation is not limited to the amount that it agrees to contribute to the fund are when the entity has a legal or constructive obligation through:
(a) a plan benefit formula that is not linked solely to the amount of contributions and requires the entity to provide further contributions if assets are insufficient to meet the benefits in the plan benefit formula;
(b) a guarantee, either indirectly through a plan or directly, of a specified return on contributions; or
(c) those informal practices that give rise to a constructive obligation. For example, a constructive obligation may arise where an entity has a history of increasing benefits for former employees to keep pace with inflation even where there is no legal obligation to do so.
30 Under defined benefit plans:
(a) the entity's obligation is to provide the agreed benefits to current and former employees; and
(b) actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the entity. If actuarial or investment experience are worse than expected, the entity's obligation may be increased.
31 Paragraphs 32–49 explain the distinction between defined contribution plans and defined benefit plans in the context of multi-employer plans, defined benefit plans that share risks between entities under common control, state plans and insured benefits.

Multi-employer plans
32 An entity shall classify a multi-employer plan as a defined contribution plan or a defined benefit plan under the terms of the plan (including any constructive obligation that goes beyond the formal terms).
33 If an entity participates in a multi-employer defined benefit plan, unless paragraph 34 applies, it shall:
(a) account for its proportionate share of the defined benefit obligation, plan assets and cost associated with the plan in the same way as for any other defined benefit plan; and
(b) disclose the information required by paragraphs 135–148 (excluding paragraph 148(d)).
34 When sufficient information is not available to use defined benefit accounting for a multi-employer defined benefit plan, an entity shall:
(a) account for the plan in accordance with paragraphs 51 and 52 as if it were a defined contribution plan; and
(b) disclose the information required by paragraph 148.
35 One example of a multi-employer defined benefit plan is one where:
(a) the plan is financed on a pay-as-you-go basis: contributions are set at a level that is expected to be sufficient to pay the benefits falling due