implementation of the new public pension accounting gasb ... · no separate gasb 25/67 financial...

104th State Association of County Auditors Conference

Implementation of the New Public Pension Accounting

GASB 67/68 Panel

Panel Members (in order of presentation):David Clements, CalPERSMary Beth Redding, Bartel AssociatesDavid Bullock, MGORichard A. Green, MGO

2

Status of Implementation of GASB Standards 68

David Clement,CalPERS Senior Pension Actuary

Agenda

• GASB 68 – What CalPERS is Planning to Do• New Smoothing Methods • New Actuarial Assumptions

3

4

GASB 68 – What CalPERS is Planning to Do

New GASB Standards• GASB Statement No. 67

- Applies to plans (CalPERS)- Replaces GASB Statements No. 25

• GASB Statement No. 68- Applies to employers- Replaces GASB Statements No. 27

5

Effective Dates• GASB 67

- Fiscal Year beginning after June 15, 2013 for Plans (CalPERS)

- June 30, 2014 CAFR• GASB 68

- Fiscal Year beginning after June 15, 2014 for Employers- June 30, 2015 CAFR for most employers

6

Terminology Equivalents (Basics)Pension Terminology GASB Terminology

Present Value of Benefits (PVB) N/A

Normal Cost (NC) Service Cost

Accrued Liability (AL) Total Pension Liability

Market Value of Assets (MVA) Plan Fiduciary Net Position

Unfunded Accrued Liability Net Pension Liability

Gains / Losses Deferred Inflows/Outflows of Resources

7

8

Will CalPERS Provide GASB 68 Information?• CalPERS INTENDS on providing the information• Updating systems to produce valuation reports and allow

Employers to request valuation reports• Requesting a GASB 68 report will be similar to requesting an

amendment valuation through my|CalPERS• The Draft Report is similar to the Illustrations in Statement 68• CalPERS cannot use trust fund money

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9

Fee for GASB Valuation• Will have to charge employers asking for the information• CalPERS Board gave approval to proceed and charge

employer- GASB valuations will be done on request- Not mandatory- Fees expected to be known in fall of 2014- Likely to be different by “pooled” vs “non-pooled”

• More details to follow

9

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Potential GASB Implementation Issues• Need actuarial computer system re-write• Ability to hire staff• Timing of plan specific asset information• Need to be ready by spring of 2015

- Most employers will need the information for June 30, 2015 CAFR

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11

Potential GASB Implementation Issues (Cont.)• For first few years, CalPERS may not be able to provide all

necessary information• Example

- Cross-over calculation to determine discount rate• Employers will have to rely on outside actuarial firm if

information provided by CalPERS is deemed not sufficient by their auditors

11

Important Date Terminology• Valuation Date

- Cannot be greater than 30 months + 1 day• Measurement Date

- Must be within Employer’s 12 month fiscal year end- Valuation can be rolled forward with appropriate methods

• Reporting Date- Employer’s fiscal year end

• Asset information will be on a June 30 basis

12

GASB 68 Measurement Timing Example

13

GASB 68 Reporting Option # 1

14

6/30/13 6/30/15 6/30/16

Valuation Date Measurement Date

Reporting Date

6/30/14

CalPERS CAFR Employer CAFR

2013 2014

2014 2015

Funding Valuations

Asset Reconciliation

July 31, 2014 - complete 2014 Funding Valuations

2015Accounting Valuations

GASB 68 Reporting Options• Option 1

- Valuation date = June 30, 2013- Measurement Date = June 30, 2014- Reporting Date = June 30, 2015

• Pros- Consistent with the Plan’s reporting- Will be able to provide at an earlier date

• Cons- The 2014 valuation would likely be available

15


16

6/30/13 6/30/15 6/30/16

Reporting Date

6/30/14

CalPERS CAFR Employer CAFR

2014

2014 2015

Funding Valuations




Valuation and Measurement

Date



• Pros- Uses most recent valuation

• Cons- Maybe inconsistent with the Plan’s reporting- May not be available to meet your agency’s CAFR deadline

17


18

6/30/13 6/30/15 6/30/166/30/14

CalPERS CAFR

Employer CAFR

2014

2015

Funding Valuations




Measurement and Reporting

Date

Valuation Date



• Pros- Uses most recent valuation- Would match CalPERS June 30, 2015 CAFR

• Cons- May not be available to meet your agency’s CAFR deadline- Asset information may not be available

19

New Smoothing Methods

Previous Smoothing Policies• Originally adopted by Board in April 2005• Asset Smoothing Policy

- 15 year rolling smoothing period- Actuarial Value of Asset (AVA) corridor

• 80%-120% of Market Value of Assets (MVA)• Amortization Policy

- 30 year rolling amortization of gains and losses• Minimum contribution rate

- 30 year amortization of surplus

21

New Method Adopted by the Board in April 2013• 5 year direct rate smoothing

- 5 year ramp up/down- 30 year amortization of gains and losses

• 5 year direct rate smoothing also applies to assumption changes- 20 year amortization with 5 year ramp up/down- Automatic smoothing of assumption changes

22

Impact of New Methods• No impact on normal cost• Will impact employer contribution rates for the first time in

2015-2016• Higher contributions short term but lower contributions long

term (25 + years) with savings over the long term• Better funded status long term• Impact specific to each plan is included in the June 30, 2012

valuation report• See Circular Letter 200-019-13 for more details

23

New Smoothing MethodsCumulative Projected Increase in Employer Projected Fiscal Year

2014-15 Rate Projected Fiscal Year 2014-15 Rate

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Fiscal Year AVR of 4 AVR of 6 AVR of 8 AVR of 10 AVR of 15

2015 – 2016 1.1% 1.7% 2.2% 2.8% 4.2%

2016 – 2017 2.2% 3.4% 4.4% 5.6% 8.4%

2017 – 2018 3.3% 5.1% 6.6% 8.4% 12.6%

2018 – 2019 4.4% 6.8% 8.8% 11.2% 16.8%

2019 – 2020 5.5% 8.5% 11.0% 14.0% 21.0%

New Actuarial Assumptions

New Actuarial Assumptions• Adopted by Board in March 2014• Based on most recent experience study 2014 report

- Using data from 1997-2011• Findings

- Members continue to live longer• Includes future mortality improvements

- Higher rates of service retirement for certain groups- Higher salary increases for members with longer service

• See Circular Letter 200-013-14 for more details

26

Estimated Impact of New Actuarial Assumptionsbeginning in fiscal year 2016-17

Miscellaneous

27

CategoryTotal Estimated Change

in Total Normal Cost(% of payroll)

Total Estimated Ultimate Change in Employer

Rate in 2016-17

(% of payroll)


Rate in 2020-21(% of payroll)

3% at 60 0.6% to 0.7% 1.2% to 1.9% 4.0% to 6.7%

2.7% at 55 0.4% to 0.7% 0.9% to 1.9% 3.1% to 6.5%

2.5% at 55 0.2% to 0.4% 0.6% to 1.3% 2.4% to 4.8%

2% at 55 0.2% to 0.3% 0.4% to 1.3% 1.3% to 5.1%

2% at 60 0.3% to 0.4% 0.4% to 1.0% 1.0% to 3.1%

Estimated Impact of New Actuarial Assumptionsbeginning in fiscal year 2016-17

Safety

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CategoryTotal Estimated Change

in Total Normal Cost(% of payroll)


Rate in 2016-17

(% of payroll)


Rate in 2020-21(% of payroll)

CPO 1.6% to 2.1% 2.6% to 3.5% 7.1% to 8.7%

Fire 0.0% to 0.5% 1.2% to 1.9% 6.3% to 7.2%

Police 1.1% to 1.7% 1.9% to 3.3% 5.3% to 9.3%

April 23, 2014

Mary Beth Redding

www.bartel-associates.com [email protected]

GASB 68 Implementation IssuesGASB 45 Update

PEMHCA Implied Subsidy

30SACA 4/23/2014

GASB 68

Implementation Issues

31SACA 4/23/2014

GASB 68What Is It?

Everyone will recognize pension unfunded liability (asset) regardless of contributions

Net Pension Liability drives Pension Expense

Systems and plan sponsors will determine contribution and funding policy

32SACA 4/23/2014

Total Pension Liability Measure of present value of benefits deemed earned to

date (“past service”) aka Actuarial Accrued Liability

Must use Entry Age actuarial (“funding”) method May require minor changes to comply with GASB 68 May require change if DROP

33SACA 4/23/2014

Total Pension Liability Must include value of: Automatic postemployment benefit changes Projected ad hoc post employment benefit changes COLAs Supplemental Retirees Benefit Reserve benefits

34SACA 4/23/2014

Total Pension Liability Discount rate – single equivalent rate based on long

term rate of return of plan investments To the extent: Projected plan assets expected to be available to pay benefits Plan assets expected to be invested using long term strategy

Net of investment expenses Consider most recent 5-year contribution history Consider establishing a written contribution policy Demonstration of discount rate calculation (“crossover”)

may need to be provided to auditors

35SACA 4/23/2014

Fiduciary Net Position Fiduciary Net Position (“Assets”) Market Value Reserves included Administrative expenses treated separately

Adjust for contributions between Measurement Date and FYE as Deferred Inflow/Outflow

Contributions paid to Trust after FYE don’t count unless Legally Enforceable

36SACA 4/23/2014

Net Pension Liability: Cost-Sharing Plans

How to determine proportionate share? Should be consistent with employer contributions Encourage use of projected long-term contribution effort Different methods => different proportions Different group demographics influence results

Disclosures not in AICPA white paper examples: Schedule showing year-by-year projected recognition of

deferred outflows and inflows of resources Change in net pension liability with discount rate

37SACA 4/23/2014

Net Pension Liability Allocation to employer Funds Need to determine method Simple (i.e., % of payroll) More accurate usually more difficult Need “reality check” on allocation results

38SACA 4/23/2014

Transition Options for transition Deferred inflows and outflows of revenue Must reconstruct ALL or None Expect no agencies will start with beginning balances,

except for contributions after the Measurement Date

39SACA 4/23/2014

Pension Expense Service cost At end of year

Net employer portion

Interest cost

Expected return on assets

Plan administrative expense

Recognition of deferred outflows and inflows

40SACA 4/23/2014

Pension Expense Deferred Outflow & Inflow Recognition—Expensed portion of: Current year differences between expected and actual experience

Previous differences between expected and actual experience

Current year assumption changes

Previous assumption changes

Current year difference between actual & projected investment earnings

Previous difference between actual & projected investment earnings

Current year changes in proportion and differences between employer contributions and proportionate share of contributions

Previous changes in proportion and differences between employer contributions and proportionate share of contributions

41SACA 3/25/2014

GASB 67 Plan reported as a fiduciary fund No separate GASB 25/67 financial statements issued All GASB 67 disclosures required for FY beginning after

6/15/2013

42SACA 4/23/2014

GASB 68

Discuss with your actuary now: Valuation timing Asset timing, including allocations Contribution policy for discount rate Consider need for beginning of year numbers Information required, including allocations Fees for Employer accounting generally not payable from a

pension Trust

43SACA 4/23/2014

Anticipated

New OPEB Standard& PEMHCA Implied

Subsidy

44SACA 4/23/2014

New OPEB Accounting Standard

Similar to GASB 67 & 68

Timing Exposure Draft April 2014

Comments May-July 2014

Hearing August 2014

Final June 2015

45SACA 4/23/2014

New OPEB Accounting Standard

Effective Dates

Plans Plan Years Beg. > December 15, 2015

Plan Sponsors with plans administered through Trust

Fiscal Years Beg. > December 15, 2016

Plan Sponsors with plans notadministered through Trust

Fiscal Years Beg. > June 15, 2016

46SACA 4/23/2014

GASB 45 – Implied Subsidy Employer cost for allowing retirees to participate

at active premium rates

Single Coverage Retiree Medical Cost

0

200

400

600

800

1,000

1,200

30 35 40 45 50 55 60 65Age

Mon

thly

Cos

t

PremiumMale CostFemale Cost

47SACA 4/23/2014

GASB 45 – Implied Subsidy ASOP Exposure Draft would require Implied subsidy be valued for all plans, including

“community rated”

Based on medical plan’s (not agency’s) demographics

Proposed final ASOP expected March 2014

Actuaries likely must comply for 6/30/15 vals

Likely to increase costs & liability if in PEMHCA

A preparer perspective

GASB 68

April 23, 2014

David Bullock, CPA, Partner

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Topics.

• Net Pension Liability (NPL) – Measured as the difference between the employer’s total pension liability (TPL) and the plan’s fiduciary net position (PNP) as of the measurement date.

• Pension Expense (PE) – Measured as the change in NPL with certain exceptions.

Immediate recognition:• Service costs (+)• Interest on TPL (+)• Changes in benefits (+or-)• Projected investment returns over the year (-)• Administrative expenses and other changes of the pension plan (+or-)Deferred recognition:• Changes in TPL due to changes in actuarial assumptions and differences in

assumed and actual actuarial experience• Changes in PNP due to difference between projected and actual investment returns

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50 50

Timing and Frequency Considerations

The Net Pension Liability (NPL) should be measured as of a date noearlier than the end of the employer’s prior fiscal year, consistentlyapplied from period to period (the measurement date) * Key Decision

Measurement Date.

Measurement Date

(Measurement Period)

Contributions after measurementdate are deferred outflows of resources

EmployerCurrent Fiscal Year

EmployerPrior Fiscal Year

Pension Expense

PlanPrior Fiscal Year

June 30, 2015June 30, 2014

PlanCurrent Fiscal Year

June 30, 2013

* Note: Don’t forget about the restatement of beginning balances

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Financial Statements.

Total Pension Liability

Plan Net Position

Net Pension Liability

Balances at June 30, 2013 56,000,000$ 40,000,000$ 16,000,000$

Changes for the year:Service cost 1,400,000 - 1,400,000 Interest 4,100,000 - 4,100,000 Changes of benefit terms 300,000 - 300,000 Changes of assumptions 100,000 - 100,000

(200,000) - (200,000) Contributions - employer - 2,000,000 (2,000,000) Contributions - employee - 500,000 (500,000) Net investment income - 3,500,000 (3,500,000)

(2,200,000) (2,200,000) - Administrative expenses - (100,000) 100,000 Other changes - 20,000 (20,000)

Net changes 3,500,000 3,720,000 (220,000)

Balances at June 30, 2014 $ 59,500,000 $ 43,720,000 $ 15,780,000

COUNTY OF PENSIONVILLEPension Results, Provided by the Pension PlanFor the Measurement Date of June 30, 2014

Increase (Decrease)

Benefit payments, including refunds of employee contributions

Differences between expected and actual experience

52 52



Plan Net Position

Net Pension Liability Amount

Balances at June 30, 2013 56,000,000$ 40,000,000$ 16,000,000$

Changes for the year:Service cost 1,400,000 - 1,400,000 Service cost 1,400,000$ Interest 4,100,000 - 4,100,000 Interest on the total pension liability 4,100,000 Changes of benefit terms 300,000 - 300,000 Changes of benefit terms 300,000 Changes of assumptions 100,000 - 100,000 Changes of assumptions 10,000

(200,000) - (200,000) Differences between expected and actual experience (20,000)

Contributions - employer - 2,000,000 (2,000,000) Contributions - employee - 500,000 (500,000) Employee contributions (500,000) Net investment income - 3,500,000 (3,500,000) Projected earnings on pension plan investments (2,800,000)

(2,200,000) (2,200,000) - Differences between projected and actual earnings on investments (140,000)

Administrative expenses - (100,000) 100,000 Administrative expenses 100,000 Other changes - 20,000 (20,000) Other changes (20,000)

Net changes 3,500,000 3,720,000 (220,000) Total pension expense 2,430,000$

Balances at June 30, 2014 $ 59,500,000 $ 43,720,000 $ 15,780,000

ReconciliationTotal pension expense..................................................................... 2,430,000$

Deferred outflows/inflows of resources: Changes of assumptions............................................................... 90,000 Differences between expected and actual experience.................... (180,000) Differences between projected and actual earnings on investments. (560,000) Employer contributions.................................................................... (2,000,000)

Net changes in NPL....................................................................... (220,000)$


Increase (Decrease)



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Plan Net Position


Balances at June 30, 2013 56,000,000$ 40,000,000$ 16,000,000$







Balances at June 30, 2014 $ 59,500,000 $ 43,720,000 $ 15,780,000






Increase (Decrease)


54 54



Plan Net Position


Balances at June 30, 2013 56,000,000$ 40,000,000$ 16,000,000$







Balances at June 30, 2014 $ 59,500,000 $ 43,720,000 $ 15,780,000






Increase (Decrease)


55 55


Debit Credit1 Record beginning balances

Net position, beginning of year 14,000,000$ Deferred outflows of resources (employer pension contributions for FYE June 30, 2014) 2,000,000

Net pension liability 16,000,000$ *

2 Recognize timing of employer pension contributionsNet pension liability 2,000,000$ *Deferred outflows of resources 100,000

Employer pension contributions for FYE June 30, 2015 2,100,000$

3 Record the changes in NPL (without employer contributions in JE #2)Pension expense 2,430,000$ Deferred outflows of resources - changes of assumptions 90,000

Deferred inflows of resources - differences between expected and actual experience 180,000$ Deferred inflows of resources - differences between projected and actual earnings on investments 560,000

Net pension liability 1,780,000 *

Reconciliation of Net Pension Liability (NPL)Beginning NPL JE #1 16,000,000$

Changes related to employer pension contributions JE #2 (2,000,000)

Changes related to pension expense and deferred outflows/inflows of resources JE #3 1,780,000

Ending NPL 15,780,000$

COUNTY OF PENSIONVILLEJournal Entries Related to Implementation of GASB68

For the Year Ended June 30, 2015

56 56


Employer Contributions made in FYE June 30, 2015 Allocation

Fund Financial Statements

Governmental Activities

Reconciliation

Government-wide Financial

Statements

Employer contributions:General Fund:

General government 250,000$ 11.90% 1,600,000$ 251,429$ 1,851,429$ Public safety 900,000 42.86%Transportation 300,000 14.29%Community development 150,000 7.14%

Water Enterprise Fund 400,000 19.05% 462,857 462,857 Internal Service Fund 100,000 4.76% 115,714 115,714

Totals for FYE June 30, 2015 $ 2,100,000 100.00% $ 2,178,571 $ 251,429 $ 2,430,000

Net Pension LiabilityGovernmental Activities:

Governmental Funds 12,022,857$ 76.19%Internal Service Funds 751,429 4.76%

Total Governmental Activities 12,774,286

Business-Type Activities:Water Enterprise Fund 3,005,714 19.05%

Total Net Pension Liability 15,780,000$

Pension Expense (Expenditures)

COUNTY OF PENSIONVILLEAllocation of Pension Expense and Net Pension Liability

For the Measurement Date of June 30, 2014

Deferredouflows /inflows of resources should be allocated in the same manner.

April 23, 2014

AICPA Proposed Recommendations

Richard A. Green, CPA, Partner

58

Cost-Sharing Multiple-Employer Plans –Current Status of AICPA Proposed

Recommendations

Two White Paperso Government Employer Participation in Cost-Sharing Multiple

Employer Plans: Issues Related to Information for Employer Reporting

o Single Employer and Cost-Sharing Multiple-Employer Plans: Issues Associated with Testing Census Data

Four Auditing Interpretations o Issued in April 2014

59

Cost-Sharing Multiple-Employer Plans –AICPA Proposed Recommendations

Include supplemental “schedule of employer allocations” in plan financial statements for which plan auditor is engaged to provide opinion o Use allocations method based on covered payroll or required (actual)

contributions depending on whether there are different classes of benefits and whether allocations expected to be representative of future contributions

o Projected future contributions could be used if necessary

60

Example Schedule of Employer Allocations

EXAMPLE OF COST-SHARING PENSION PLANSchedule of Employer Allocations

June 30, 2015

Employer/ 2015Nonemployer Actual Employer

(special funding Employer Allocation situation) Contributions Percentage

State of Example $ 2,143,842 38.9%Employer 1 68,425 4.9%Employer 2 322,142 5.8%Employer 3 483,255 8.8%Employer 4 633,125 11.5%Employer 5 144,288 2.6%Employer 6 95,365 1.7%Employer 7 94,238 1.7%Employer 8 795,365 14.4%Employer 9 267,468 4.9%Employer 10 267,128 4.8%

Total $ 5,514,641 100.0%

61

Cost-Sharing Multiple-Employer Plans –AICPA Proposed Recommendations Plan prepare “schedule of plan pension amounts by

employer” for which plan auditor engaged to provide opiniono Supplemental schedule of plan pension amounts by employer

includes net pension liability, deferred outflows of resources, deferred inflows, and pension expense for each employer

An alternative could be to only include a “schedule of collective pension amounts” for the plan as a whole

Plan auditor needs to consider the appropriateness of the materiality used in the audit of PERS financial statements

o Employer auditor issues opinion on total of each of the four “elements” in accordance with AU-C 805 Net pension liability, total deferred outflows of resources, total deferred

inflows of resources, and total pension expense

62

Example Schedule of Pension Amounts by Employer

Changes in Changes in NetEmployer Employer AmortizationProportion Proportion of Deferred

and Differences and Differences Amounts fromDifferences Differences Between Differences Differences Between Changes inBetween Between Contributions Between Between Contributions Proportionate Proportion and

Employer/ Expected Projected and Proportionate Expected Actual and and Proportionate Share of ProportionateNonemployer and Actual and Actual Share of and Actual Projected Share of Plan Share of

(special funding Net Pension Economic Investment Changes of Pension Economic Investment Changes of Pension Pension Pension situation) Liability Experience Earnings Assumptions Expense Experience Earnings Assumptions Expense Expense Expense

State of Example 38,589,135$ 428,768 2,058,088 1,500,690 782,365 380,371 1,063,285 - 584,365 1,878,717 12,375 Employer 1 4,831,647 53,685 257,688 187,898 96,633 47,625 133,131 - 125,325 235,229 (1,793) Employer 2 5,798,553 64,428 309,256 225,499 115,971 57,156 159,773 - 245,386 282,303 (8,088) Employer 3 8,698,585 96,651 463,925 338,279 173,972 85,742 239,681 - 125,632 423,492 3,021 Employer 4 11,396,244 126,625 607,800 443,188 227,925 112,332 314,012 - 386,325 554,828 (9,900) Employer 5 2,597,183 28,858 138,516 101,002 51,944 25,600 71,563 - 42,358 126,444 599 Employer 6 1,716,569 19,073 91,550 66,756 34,331 16,920 47,298 - 24,325 83,571 625 Employer 7 1,696,283 18,818 90,468 65,967 33,926 16,720 46,739 - 125,325 82,584 (5,712) Employer 8 14,316,562 159,073 763,550 556,756 286,486 141,118 394,478 - 152,005 697,004 8,405 Employer 9 4,814,421 53,494 256,769 187,228 68,325 47,456 132,657 - 87,325 234,391 (1,188) Employer 10 4,808,301 53,426 256,443 186,990 67,528 47,395 132,488 - 41,035 234,093 1,656

Total 99,263,483$ 1,102,899 5,294,053 3,860,253 1,939,406 978,435 2,735,105 - 1,939,406 4,832,656 -

Deferred Outflow of Resources Deferred Inflows of Resources Pension Expense

EXAMPLE COST-SHARING PENSION PLANSchedule of Pension Amounts

June 30, 2015

63

Cost-Sharing Multiple-Employer Plans –Testing Underlying Census Data of Active

Employees Risk-based approach by plan auditor to select employers

to testo Individually important employers (i.e. > 20% of plan) tested annually o Plan auditor performs risk assessment on remaining employers using

tiered approach For example: Employers between 5 and 20% tested to approximate a 5 year

cycle Employers less than 5% tested to approximate a 10 year cycle Many small employers will never be tested (e.g. 400 employers

represent 2% in aggregate plan)

Employer auditor may perform procedures under examination engagement in accordance with AT (Attest) Section 101

64

Cost-Sharing Multiple-Employer Plans –Testing Underlying Census Data of Active

Employees Example risk factors to consider for selecting employers

to test o Size of employer in relation to plano Past errors or control deficiencies of an employero Length of time since procedures last performed for employero Whether there have been significant changes in workforceo Results of internal analysis (analytical procedures) of employer

informationo New or terminating employero Whether employer financial statement are audited have received

unmodified opinions

Absence of effective management procedures and controls by plan to verify census data is considered a control deficiency and will impact level of auditor testing

65

Cost-Sharing Multiple-Employer Plans –Employer Responsibilities

Evaluate appropriateness of information used to record financial statement amounts

Report complete and accurate data to plan

Evaluate whether plan auditor’s report on schedules are adequate and appropriate for employer purposes

Verify and recalculate amounts in schedules specific to employer o Employer amount used in allocation percentage (numerator)o Recalculate allocation percentage of employero Recalculate allocation of pension amounts based on allocation

percentage of employer

66

Agent Multiple-Employer Plans –Current Status of AICPA Proposed

Recommendations Two White Papers

o Government Employer Participation in Agent Multiple Employer Plans: Issues Related to Information for Employer Reporting

o Agent Multiple-Employer Plans: Issues Associate with Testing Census Data in an Audit of Plan Financial Statements

Issues and potential recommendations are more complex Discussion to continue at the AICPA Audit Task Force (AITF) Expected to be finalized end of April

Four Auditing Interpretations o Status is same as white papers

67

Fiduciary Net Position –AICPA Proposed Recommendations

Include supplemental condensed schedule of “changes in fiduciary position” by employer in plan financial statements for which plan auditor is engage to provide opinion

Plan auditor engaged to issue SOC 1 (type 2) report on allocation of inflows (i.e., contributions, investments income, etc.) and outflows (i.e., benefit payments, administrative expenses, etc.) of plan to individual employer accounts

68

Total Pension Liability, Deferred Outflows/Inflows, and Pension Expense –

AICPA Proposed Recommendations Plan actuary issues separate actuarial report for each

participating employer which includes net pension liability, deferred outflows/inflows by type and year, pension expense, and discount rate calculation o Employer management and employer auditor rely on actuary as

management specialist for total pension liability for individual employer

Plan auditor engaged to issue SOC 1 (type 2) report on census data controlled by plan (i.e. retired employees)o User controls at the plan level – Plan controls most of the information

needed by the actuary (inactive/retirees)o User controls at the employer level – Employer controls the active

employee information o This alternative continues to be discussed with AITF and likely may

change

69

Total Pension Liability, Deferred Outflows/Inflows, and Pension Expense –

AICPA Proposed Recommendations Employer auditor test census date of active employees and

confirms actuarial information (census data) used by actuary

Employer and employer auditor responsible for validating deferred outflows/inflows and pension expense related to individual employero Deferred outflows/inflows resulting from current year can be

recalculated from condensed statement of changes in fiduciary position (by employer) included as supplemental information in plan financial statements

o Rely on actuarial report for deferred outflow/inflows related to actuarial experience

o Plan auditors responsibility for testing census data of active employees continues to be discussed with AITF

implementation of the new public pension accounting gasb ... · no separate gasb 25/67 financial...

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