Accounting implications of run-on and surplus sharing

Companies with defined benefit (DB) pension schemes considering a run-on strategy, and sharing any surplus generated with members, should think through the potential corporate accounting implications of such an agreement.

As companies explore endgame options for their DB pension schemes, the strategy of running on instead of opting for a buy-out has gained traction. This shift is driven by improved funding levels and recent reforms such as the proposed Mansion House reforms and the Department for Work and Pensions' (DWP) consultation on surplus extraction.

A key consideration for companies contemplating a run-on strategy is the potential to share any surplus with members. This approach, while potentially beneficial for member outcomes, involves several accounting implications that need careful planning and agreement with auditors.

In this article, we discuss:

• Accounting implications of sharing surplus;
• Potential accounting treatments; and
• Other considerations such as stakeholder expectations and regulatory impacts.

Read the full publication here

This is a complex and grey area, and for many considering whether to run-on, the preferred accounting treatment should be considered early on in the process.

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