At its November 4, 2026 meeting, the Financial Accounting Standards Board (FASB) received an update from staff on its proposed accounting standards update (ASU) to standardize the discount rate used to measure the benefit obligation for certain market-based cash balance plans (MBCBPs). FASB reaffirmed the proposal’s central approach while making several targeted clarifications in response to comments on the exposure draft. FASB also supported an effective date for annual and interim periods beginning after December 15, 2027, for both public and private entities, with early adoption permitted at a pension remeasurement date before the effective date.

In summary, FASB determined that the final ASU would stay narrowly focused and will preserve the proposal’s main objective: standardizing how the benefit obligation is measured for certain MBCBPs under Accounting Standards Codification (ASC) Topic 715.

Why FASB is making these changes

FASB undertook this project in response to concerns that current accounting rules can produce results that do not align well with the economics of certain MBCBPs and result in inconsistency between sponsoring employers due to a lack of clarity. Under existing practice, some sponsors measure the projected benefit obligation using a traditional bond-based discount rate, even when the participant’s benefit is tied to a market-based hypothetical account balance that can be taken as a lump sum.

FASB’s proposal is intended to address that mismatch. More specifically, FASB has said the amendments are designed to reduce diversity in practice, improve comparability, and produce measurements that better reflect the economics of in-scope MBCBPs.

How accounting for market-based cash balance plans will change

The plans impacted by this change are MBCBPs in which participant benefits are communicated as an account balance comprising pay credits and interest credits based on one of the following investable market returns:

• The return on plan assets
• The return on a subset of the plan’s assets that approximates the associated cash balance liabilities
• The return on a regulated investment company

In addition, the plan must allow participants to choose a lump-sum payout of the entire account balance.

All MBCBPs meeting the above criteria would be required to set the discount rate equal to the assumed interest crediting rate when calculating the pension benefit obligation (PBO) under ASC Topic 715. FASB also proposed similar changes for plan accounting under ASC Topic 960, requiring the assumed interest crediting rate to be used in measuring the actuarial present value of accumulated plan benefits. This will result in benefit obligations that closely approximate the sum of participants’ hypothetical account balances.

Clarifications discussed at the November 4 meeting

Based on feedback on the exposure draft, FASB clarified several points while keeping the proposal’s overall direction intact:

• Narrow scope retained. FASB decided not to broaden the proposal to additional plan designs or international arrangements. Board members indicated the project should remain focused on the plans originally identified, rather than expanding into plans that would require additional research, to avoid any unintended consequences.
• Entire lump-sum account balance. FASB supported clarifying that for a plan to qualify, the lump-sum option must apply to the participant’s entire account balance.
• Application at the benefit level. FASB members indicated that guidance should apply at the qualifying benefit level, not to an entire plan. If a plan includes both qualifying MBCBP benefits and other benefit formulas, only the qualifying MBCBP benefit obligation would use the assumed interest crediting rate to determine the discount rate.
• Existing actuarial assumptions still apply. FASB indicated that features such as caps, floors, or expense adjustments are already handled through existing actuarial assumptions and do not require a different discount-rate framework.
• No rebuttable presumption. Although some commenters suggested allowing another rate in unusual circumstances, FASB rejected that idea and supported requiring the assumed interest crediting rate in all circumstances for in-scope benefits. FASB’s reasoning was that a rebuttable presumption could reintroduce judgment and diversity in practice.

Other decisions FASB made

FASB also reaffirmed several other elements of the proposal described in the meeting notes:

• All entities covered. The amendments would apply to public and private entities alike.
• No new ongoing disclosures. Other than transition disclosures, FASB decided not to add new disclosure requirements beyond existing defined benefit plan disclosures.
• Limited transition disclosure. FASB kept the requirement to disclose the nature of and reason for the change in accounting principle, without adding a separate quantitative adoption disclosure.
• Prospective transition. The amendments would be applied prospectively at the entity’s next pension measurement date. Early adoption would be allowed at any pension remeasurement date before the effective date.
• Same effective date for all entities. FASB supported an effective date for annual and interim periods beginning after December 15, 2027, including the same date for public and private entities.

FASB concluded that the expected benefits justify the expected costs and directed staff to assemble a final ASU.

Next steps for plan sponsors

FASB’s latest decisions provide a clearer view of how the final standard may take shape. Sponsors with MBCBP features should review their plan terms now—especially lump-sum provisions and any plans with multiple benefit formulas—to determine whether the proposal’s confirmed scope would apply and to understand the effect on future pension measurements.

Please contact your Milliman consultant with any questions.