FASB proposes new guidance for market-return cash balance plans

FASB has moved to close a reporting gap that has left some market-return cash balance plans measured in a way that does not match how they actually work. Under the proposal issued June 10, the board would require certain plans to use the assumed interest crediting rate as the discount rate, a change aimed at making the benefit obligation line up more closely with the plan’s hypothetical account balance. Comments are due by August 10, giving sponsors, auditors and actuaries a short window to decide whether the fix really improves comparability or simply shifts the accounting noise somewhere else.

The board says the problem has been building for more than a year. An agenda request first reached the Emerging Issues Task Force on January 30, 2025, the item was added to the task force agenda in April 2025, and the group discussed it again at its September 9, 2025 meeting before voting 8 to 3 for the approach now in the proposal. FASB says the issue moved to its technical agenda in January 2026 after the task force recommended board action in September 2025. KPMG has said the proposal addresses stakeholder-identified diversity in practice under ASC 715-30.

The practical impact should fall on employers with market-return cash balance plans, not on every sponsor with a cash balance formula. FASB describes these arrangements as cash balance plans in which interest crediting rates are based on investable market returns, an emerging type of variable interest crediting rate design. Deloitte has noted that these plans can function economically like a 401(k), because participants’ retirement value reflects principal credits plus investment returns, even though the plan sits under defined-benefit pension accounting. Deloitte also ties the rise of cash balance plans to workforce mobility, which has pushed more employers toward benefit designs that are easier to explain and more predictable than traditional pensions.

That is why this matters to KPMG professionals beyond pension specialists. Compensation and benefits teams will need to model whether the final rule changes reported liabilities, balance sheet volatility or disclosures, even if it does not change funding policy or plan economics. Auditors will need to test whether plan sponsors’ measurement approach matches the final guidance, while advisory teams will likely be pulled into plan design conversations as year-end reporting pressure builds. The key question for commenters is whether tying the discount rate to the assumed crediting rate really improves consistency, or whether it just swaps one set of estimation differences for another.