ASC 965
Active
ASC 965 – Plan Accounting–Health and Welfare Benefit Plans
Governs plan-level health and welfare benefit plan reporting including benefit obligations and claims incurred but not reported.
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Conceptual Framework Linkage
A genuinely different obligation shape – claims, not accumulated benefits
A HEALTH AND WELFARE plan (providing medical, dental, life, or disability benefits) presents a fundamentally different measurement challenge than a pension plan: its obligation isn't a long-term ACCUMULATED benefit promise, but rather a stream of relatively SHORT-TERM CLAIMS – many of which have already been INCURRED by plan participants but not yet REPORTED to (or paid by) the plan. ASC 965 addresses the plan's OWN net asset statements, PLUS the distinctive CLAIMS-based liability estimation this creates (Section 6).
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Scope
Health, life, and disability welfare benefit plans
ASC 965 applies to the separate financial statements of PLANS providing medical, dental, life, disability, and other WELFARE (non-pension) benefits.
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Statement of Net Assets Available for Benefits
The same fair-value-forward orientation as other plan accounting Topics
Consistent with ASC 960/962, the plan's primary statement presents investments (where the plan holds any, e.g. a self-funded plan's reserve assets) at FAIR VALUE, less liabilities, resulting in net assets available for benefits.
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Statement of Changes in Net Assets Available for Benefits and Benefit Obligations
Premiums/contributions in, claims paid out
This statement shows EMPLOYER and PARTICIPANT contributions/premiums received, investment activity, LESS BENEFITS (claims) PAID and administrative expenses – for plans providing POSTRETIREMENT health/welfare benefits, a PARALLEL statement of changes in benefit obligations may ALSO be required, given the longer-term nature of that specific obligation category.
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Benefit Obligations for Postretirement Health/Welfare Benefits
A plan-level parallel to the employer's own APBO under ASC 715-60
For plans providing POSTRETIREMENT (rather than active-employee) health/welfare benefits, ASC 965 requires disclosure of the plan's OWN benefit OBLIGATION – conceptually PARALLEL to the sponsoring employer's own "accumulated postretirement benefit obligation" (APBO) reported under ASC 715-60 at the EMPLOYER level – but again representing the PLAN's own separate reporting perspective, analogous to how ASC 960's accumulated plan benefits disclosure parallels (but is measured somewhat differently from) the employer's own PBO/ABO.
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Claims Incurred But Not Reported (IBNR) Liability
Estimating claims that have happened but haven't yet been submitted
A distinctive, significant liability for health and welfare plans is the "INCURRED BUT NOT REPORTED" (IBNR) claims reserve – an ESTIMATE of claims for services ALREADY RENDERED to participants (e.g. a medical procedure already performed) that have NOT YET been SUBMITTED to, or PROCESSED by, the plan as of the reporting date. This requires actuarial/statistical ESTIMATION techniques similar in spirit to INSURANCE claim reserving (see the companion ASC 944 poster) – based on historical claims lag patterns and processing timelines.
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Worked Example – an IBNR Claims Liability Estimation
Estimating unsubmitted claims based on historical lag patterns
Example: A self-funded medical plan's year-end IBNR estimate
A self-funded health plan's actuary estimates, based on historical claims submission LAG patterns, that approximately $2,400,000 of medical claims for services already rendered in the current period have NOT yet been submitted or processed as of year-end.
The plan recognises a $2,400,000 IBNR claims liability at year-end – an ESTIMATE of claims genuinely INCURRED (services already provided) but not yet REPORTED – ensuring the plan's financial statements reflect its TRUE obligation as of the reporting date, not merely the claims already submitted and processed.
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Disclosure Requirements
What ASC 965 requires
Net assets available for benefits, by major category at fair valueIBNR claims liability and the estimation methodology usedBenefit obligations for postretirement health/welfare benefits, where applicable
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Selecting an appropriate actuarial/statistical methodology for estimating IBNR claims
SIGNIFICANT ESTIMATES
IBNR claims liability, based on historical claims lag patternsPostretirement health/welfare benefit obligations, where applicable
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ASC 965 vs IFRS – a Narrower Correspondence
A less developed area of direct correspondence than pension plan accounting
While IAS 26 addresses RETIREMENT benefit plans broadly (providing a reasonably close counterpart for ASC 960/962), dedicated INTERNATIONAL guidance specifically for HEALTH AND WELFARE benefit PLAN-level financial reporting (as opposed to insurance company accounting under IFRS 17, or general employee benefit accounting under IAS 19 at the EMPLOYER level) is LESS developed – meaning ASC 965's specific IBNR claims reserve methodology and plan-level welfare benefit obligation disclosures don't have as CLOSE or as WIDELY-recognised a direct IFRS counterpart as ASC 960/962 do through IAS 26.
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Statement Mapping
Where every ASC 965 event lands (plan-level statements)
EventStatement(s) affectedNotes
IBNR claims liabilityNet assets statementReduces net assets available for benefits
Premiums/contributions receivedChanges in net assets statementIncreases net assets available for benefits
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Related Topics
Cross-reference map
TopicConnection
ASC 715Governs the sponsoring employer's own postretirement benefit accounting (APBO), a parallel employer-level obligation
ASC 944Financial Services–Insurance – shares similar claims reserve/IBNR estimation concepts
ASC 960Plan Accounting–Defined Benefit Pension Plans – a related plan-level Topic with similar net assets statement structure
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Quick-Reference Glossary
Incurred but not reported (IBNR)
An estimated liability for claims already incurred by plan participants but not yet submitted to or processed by the plan.
Postretirement health/welfare benefit obligation (plan-level)
A health and welfare plan's own disclosed obligation for postretirement benefits, paralleling but distinct from the sponsoring employer's APBO under ASC 715-60.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows