On June 10, 2026, the Financial Accounting Standards Board (FASB) issued an exposure draft of a proposed accounting standards update (ASU) that would amend Accounting Standards Codification (ASC) Subtopic 715-30 to change how certain market-based cash balance plans (MBCBPs) measure benefit obligations for employer accounting. The proposal also includes corresponding amendments to ASC Subtopic 960-20 related to the measurement of the actuarial present value of accumulated plan benefits in the financial statements of the defined benefit (DB) plan. Comments on the exposure draft are due by August 10, 2026.

Why FASB is proposing changes to market-based cash balance plan accounting

MBCBPs are accounted for as DB plans under U.S. GAAP, but stakeholders have raised concerns that there are different interpretations of how ASC guidance applies to MBCBPs, resulting in accounting liabilities not always reflecting the economics of MBCBPs. U.S. Accounting Standards, as promulgated by FASB, has provided limited guidance on how to measure the benefit obligation for these plans, particularly regarding the appropriate discount rate. As a result, entities have been using different approaches, often resulting in reported benefit obligations that differ from the sum of participant account balances and, in some cases, exceed those balances. One common example occurs when projected future interest credits are higher than the discount rate determined by matching plan cash flows to the yield of high-quality corporate bonds. The inconsistency in accounting practices has reduced comparability and transparency in financial reporting, making it more difficult for users of financial statements to accurately assess and compare the economic obligations of different entities sponsoring otherwise similar plans.

The Emerging Issues Task Force (EITF), a FASB advisory group that addresses new and developing financial reporting issues, noted that cash balance plans, including MBCBPs, have become increasingly common and may become more prevalent in the future. Therefore, addressing how these plans are accounted for deserves attention. The proposed amendments are intended to (1) more accurately reflect the economics of these plans and (2) promote more consistent application of the measurement guidance in Subtopic 715-30 across these plans.

Which market-based cash balance plans would be impacted?

The plans impacted by this change are MBCBPs in which participant benefits are communicated as an account balance, comprised of 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 option. This was an important scoping condition because it helps identify the MBCBPs for which the benefit obligation should generally tie to the hypothetical account balance.

What the proposal could mean for funded status and pension cost

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.

No additional disclosures would be required because of these changes.

For an entity that sponsors an MBCBP where the pay credits are fully funded and the interest credits are tied to the return on plan assets, the accounting impact would generally be as follows:

• The market value of assets would approximately equal the liability (i.e., the sum of the hypothetical account balances), resulting in a fully funded plan.
• The net periodic pension cost (NPPC) would generally equal the pay credits.
• The service cost component of the NPPC would generally equal the pay credits.
• The interest cost would be offset by the expected return on plan assets, resulting in a net effect on the NPPC of approximately zero.
• Any adjustment for the difference between the assumed and actual interest crediting rate would offset the adjustment for the difference between the expected and actual return on plan assets.

The benefit obligation may differ from the sum of the hypothetical account balances if the plan includes features that increase the inherent value of the benefit above the hypothetical account balance—for example, an MBCBP that offers a preservation-of-capital floor¹ greater than the statutory 0%, enhanced/subsidized annuity options, or other features that give participants embedded value in their benefit that is greater than the account balance.

Transition and effective date of the new FASB rules for market-based cash balance plans

Plan sponsors would apply the new pension accounting guidance prospectively, beginning with their next pension measurement date. They also have the option to adopt the changes early. Whichever timing they choose, sponsors would be required to disclose the nature of the new accounting method and the rationale for making the change in the interim reporting period (if applicable) and the annual reporting period in which the change is adopted.

The effective date will be determined after FASB reviews the comments received on the exposure draft.

Key questions FASB is asking stakeholders about the proposed changes

FASB invites comments on any part of the exposure draft but is particularly interested in feedback on the following questions.

1. Is it clear which plans would be covered by the proposed amendments, and would the scope be practical to apply in practice? Do you foresee any audit challenges?
2. Would the change result in more useful information for users and better comparability across plans? Is this requirement clear and workable, and could it create any audit challenges?
3. Should in-scope MBCBPs always use the assumed interest crediting rate as the discount rate, or are there situations in which a different discount rate would be more appropriate?
4. Should this approach also apply to other DB plans that are economically similar to in-scope MBCBPs? If yes, what types of plans should be included, how should they be defined, and how common are they? Would any changes to the proposal be needed if the scope were broadened?
5. Do you agree with the changes to the guidance for cash balance plans and for measuring benefit obligations in ASC Topic 715 and ASC Topic 960? Why or why not?
6. Are the proposed transition rules practical to implement? If not, what transition approach would work better? Would the required disclosures give users meaningful information?
7. How much time would organizations need to implement the proposed amendments? Should private and other nonpublic entities be given more time than public business entities? If so, how much more time would be appropriate?
8. Should early adoption be allowed at any point before the effective date? Why or why not?

What the proposed changes could mean for sponsors of market-based cash balance plans

By enhancing clarity, consistency, and alignment with the underlying economics of these plans, the new FASB guidance may make MBCBPs a more attractive and feasible option for a wider array of employers.

Please contact your Milliman consultant with any questions.

Recommended reading

Financial Accounting Standards Board adopts recommendation to update market-based cash balance accounting rules

Market-based cash balance plans (MBCBP): Frequently asked questions

¹ The preservation-of-capital requirement for cash balance plans generally means that a participant’s accrued benefit cannot fall below the sum of the pay credits, without interest.