no. 266-a may 2007 governmental accounting standards series
TRANSCRIPT
NO. 266-A MAY 2007
Governmental
Accounting Standards Series
Statement No. 50 of the Governmental Accounting
Standards Board
Pension Disclosures
an amendment of GASB Statements No. 25 and No. 27
Governmental Accounting Standards Board of the Financial Accounting Foundation
For additional copies of this Statement and information on applicable prices and discount
rates, contact:
Order Department
Governmental Accounting Standards Board
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116
Telephone Orders: 1-800-748-0659
Please ask for our Product Code No. GS50.
The GASB website can be accessed at www.gasb.org.
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Summary
This Statement more closely aligns the financial reporting requirements for
pensions with those for other postemployment benefits (OPEB) and, in doing so,
enhances information disclosed in notes to financial statements or presented as required
supplementary information (RSI) by pension plans and by employers that provide
pension benefits. The reporting changes required by this Statement amend applicable note
disclosure and RSI requirements of Statements No. 25, Financial Reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27,
Accounting for Pensions by State and Local Governmental Employers, to conform with
requirements of Statements No. 43, Financial Reporting for Postemployment Benefit
Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions.
Summary of Standards
This Statement amends Statements 25 and 27 to require defined benefit pension
plans and sole and agent employers present the following information related to note
disclosures or RSI:
Notes to financial statements should disclose the funded status of the plan as of the
most recent actuarial valuation date. Defined benefit pension plans also should
disclose actuarial methods and significant assumptions used in the most recent
actuarial valuation in notes to financial statements instead of in notes to RSI.
If the aggregate actuarial cost method is used to determine the annual required
contribution of the employer (ARC), notes to financial statements should disclose the
funded status of the plan, and a schedule of funding progress should be presented as
RSI, using the entry age actuarial cost method. Plans and employers also should
disclose that the purpose of doing so is to provide information that serves as a
surrogate for the funded status and funding progress of the plan.
Notes to financial statements should include a reference linking the funded status
disclosure in the notes to financial statements to the required schedule of funding
progress in RSI.
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If applicable, notes to financial statements should disclose legal or contractual
maximum contribution rates. In addition, if relevant, they should disclose that the
maximum contribution rates have not been explicitly taken into consideration in the
projection of pension benefits for financial accounting measurement purposes.
If an actuarial assumption is different for successive years, notes to financial
statements should disclose the initial and ultimate rates.
This Statement amends Statement 25 to require defined benefit pension plans and
defined contribution plans to disclose in the notes to financial statements the methods and
assumptions used to determine the fair value of investments, if the fair value is based on
other than quoted market prices.
This Statement amends Statement 27 to require cost-sharing employers to include,
in the note disclosure of the required contribution rates of the employer(s) in dollars and
the percentage of that amount contributed for the current year and each of the two
preceding years, how the contractually required contribution rate is determined (for
example, by statute or by contract, or on an actuarially determined basis) or that the cost-
sharing plan is financed on a pay-as-you-go basis.
This Statement also amends Statement 27 to require that, if a cost-sharing plan does
not issue a publicly available stand-alone plan financial report prepared in accordance
with the requirements of Statement 25, as amended, and the plan is not included in the
financial report of another entity, each employer in that plan should present as RSI the
schedules of funding progress and employer contributions for the plan (and notes to these
schedules). Each employer also should disclose that the information presented relates to
the cost-sharing plan as a whole, of which the employer is one participating employer,
and should provide information helpful for understanding the scale of the information
presented relative to the employer.
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Effective Date and Transition
This Statement is effective for periods beginning after June 15, 2007, except for
requirements related to the use of the entry age actuarial cost method for the purpose of
reporting a surrogate funded status and funding progress of plans that use the aggregate
actuarial cost method, which are effective for periods for which the financial statements
and RSI contain information resulting from actuarial valuations as of June 15, 2007, or
later. Early implementation is encouraged. In the initial year of implementation, defined
benefit pension plans and sole and agent employers that use the aggregate actuarial cost
method to determine the ARC are required to present elements of information in the
schedule of funding progress using the entry age actuarial cost method as of the most
recent actuarial valuation date. In subsequent years, plans and employers should add to
that schedule information as of subsequent actuarial valuation dates until the
requirements of Statements 25 and 27, as amended, with regard to the minimum number
of years or actuarial valuations to be included have been met.
How the Changes in This Statement Will Improve Financial Reporting
Statements 43 and 45, which were developed using Statements 25 and 27 as
models, improved the transparency and decision usefulness of financial reporting as a
result of decisions by the Board to modify, for financial reporting by OPEB plans and
employers, certain requirements related to note disclosures and RSI. This Statement
similarly is intended to improve the transparency and usefulness of financial reporting by
pension plans and employers by amending Statements 25 and 27 to conform with the
applicable note disclosure and RSI modifications adopted in the OPEB Statements.
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Unless otherwise specified, pronouncements of the GASB apply to financial reports of all
state and local governmental entities, including general purpose governments; public
benefit corporations and authorities; public employee retirement systems; and public
utilities, hospitals and other healthcare providers, and colleges and universities.
Paragraph 3 discusses the applicability of this Statement.
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Statement No. 50 of the Governmental Accounting
Standards Board
Pension Disclosures
an amendment of GASB Statements No. 25 and No. 27
May 2007
Governmental Accounting Standards Board of the Financial Accounting Foundation
401 Merritt 7, PO Box 5116, Norwalk, Connecticut 06856-5116
vi
Copyright © 2007 by Governmental Accounting Standards Board. All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of the Governmental
Accounting Standards Board.
vii
Statement No. 50 of the Governmental Accounting Standards Board
Pension Disclosures
an amendment of GASB Statements No. 25 and No. 27
May 2007
CONTENTS
Paragraph
Numbers
Introduction ....................................................................................................................... 1
Standards of Governmental Accounting and Financial Reporting ............................. 2–10
Scope and Applicability of This Statement .......................................................... 2– 3
Amendments to Statement 25 ............................................................................... 4– 6
Notes to the Financial Statements ................................................................... 4– 5
Required Supplementary Information................................................................... 6
Amendments to Statement 27 ............................................................................... 7–10
Notes to the Financial Statements ................................................................... 7– 8
Required Supplementary Information............................................................. 9–10
Effective Date and Transition ................................................................................... 11–13
Appendix A: Background ........................................................................................ 14–16
Appendix B: Basis for Conclusions ......................................................................... 17–58
Appendix C: Illustrative Note Disclosures and Required Supplementary
Information ................................................................................................................... 59
Appendix D: Codification Instructions .......................................................................... 60
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Statement No. 50 of the Governmental Accounting Standards Board
Pension Disclosures
an amendment of GASB Statements No. 25 and No. 27
May 2007
INTRODUCTION
1. The objective of this Statement is to amend note disclosure and required
supplementary information (RSI) standards of Statements No. 25, Financial Reporting
for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans,
and No. 27, Accounting for Pensions by State and Local Governmental Employers, to
conform with applicable changes adopted in Statements No. 43, Financial Reporting for
Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and
Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.
This Statement is intended to improve the transparency and decision usefulness of
reported information about pensions by state and local governmental plans and
employers.
STANDARDS OF GOVERNMENTAL ACCOUNTING AND FINANCIAL
REPORTING
Scope and Applicability of This Statement
2. This Statement establishes and modifies requirements related to financial reporting
by pension plans and by employers that provide defined benefit and defined contribution
pensions. It amends Statement 25, paragraphs 27, 32, 36, 37, 40, and 41 and footnote 24,
and it supersedes footnotes 17 and 18 of that Statement. It also amends paragraphs 20–22
and footnotes 10 and 17 of Statement 27.
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3. The provisions in paragraphs 4 and 6 of this Statement apply to defined benefit
pension plans of all state and local governments. The provisions of paragraph 5 of this
Statement apply to defined contribution plans of all state and local governments. The
provisions of paragraphs 7–10 of this Statement apply to all state and local governmental
employers that provide or participate in defined benefit pension plans.
Amendments to Statement 25
Notes to the Financial Statements
4. Defined benefit pension plans should make the following additional disclosures in
notes to the financial statements:
a. In the summary of significant accounting policies, the requirement of Statement 25,
paragraph 32b(2), for disclosure of a brief description of how the fair value of
investments is determined should include the methods and significant assumptions
used to estimate the fair value of investments, if that fair value is based on other
than quoted market prices.
b. In the disclosure of contributions and reserves required by Statement 25,
paragraph 32c, legal or contractual maximum contribution rates should be
disclosed, if applicable.
c. Information about the funded status of the plan as of the most recent valuation date
should be disclosed, including the actuarial valuation date, the actuarial value of
assets, the actuarial accrued liability, the total unfunded actuarial accrued liability,
the actuarial value of assets as a percentage of the actuarial accrued liability (funded
ratio), the annual covered payroll, and the ratio of the unfunded actuarial liability to
annual covered payroll.1 The information should be calculated in accordance with
the parameters set forth in paragraphs 35 and 36 of Statement 25. Plans that use the
aggregate actuarial cost method to calculate the annual required contribution of the
employer(s) (ARC) should prepare funded status information using the entry age
actuarial cost method.
d. Information about actuarial methods and assumptions used in valuations on which
reported information about the ARC and the funded status and funding progress of
pension plans are based should be disclosed, including the following:
(1) Disclosure that the required schedule of funding progress immediately
following the notes to the financial statements presents multiyear trend
1Paragraph 37 of Statement 25 requires plans to disclose the same elements of information for each of the
past six consecutive fiscal years of the plan as RSI (schedule of funding progress).
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information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits.2
(2) Disclosure that the projection of benefits for financial reporting purposes does
not explicitly incorporate the potential effects of legal or contractual funding
limitations, if applicable.
(3) Identification of the actuarial methods and significant assumptions used to
determine the ARC for the current year and the information required by
paragraph 4c of this Statement. The disclosures should include:
(a) The actuarial cost method.
(b) The method(s) used to determine the actuarial value of assets.
(c) The assumptions with respect to the inflation rate, investment return
(discount rate), projected salary increases, and postretirement benefit
increases. If the economic assumptions contemplate different rates for
successive years (year-based or select and ultimate rates), the rates that
should be disclosed are the initial and ultimate rates.
(d) The amortization method (level dollar or level percentage of projected
payroll) and the amortization period (equivalent single amortization
period, for plans that use multiple periods) for the most recent actuarial
valuation and whether the period is closed or open. Plans that use the
aggregate actuarial cost method should disclose that because the method
does not identify or separately amortize unfunded actuarial accrued
liabilities, information about the plan’s funded status and funding
progress has been prepared using the entry age actuarial cost method for
that purpose and that the information presented is intended to serve as a
surrogate for the funded status and funding progress of the plan.
5. For defined contribution plans, the requirement of Statement 25, paragraph 41b, for
disclosure of a brief description of how the fair value of investments is determined should
include the methods and significant assumptions used to estimate the fair value of
investments, if that fair value is based on other than quoted market prices.
Required Supplementary Information
6. Plans that use the aggregate actuarial cost method should prepare the information
presented in the schedule of funding progress using the entry age actuarial cost method
and should disclose that fact and that the purpose of this disclosure is to provide
information that serves as a surrogate for the funding progress of the plan.
2The required reference to the schedule of funding progress presented as RSI does not represent or imply
incorporation of the schedule of funding progress into notes to the basic financial statements.
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Amendments to Statement 27
Notes to the Financial Statements
7. Employers should include the following additional disclosures about funding policy
in notes to the financial statements for each defined benefit pension plan in which they
participate:
a. Legal or contractual maximum contribution rate(s) of the employer should be
disclosed, if applicable.
b. For cost-sharing employers, the requirement of Statement 27, paragraph 20b(3), for
disclosure of the required contribution rates of the employer(s) in dollars and the
percentage of that amount contributed for the current year and each of the two
preceding years should include a description of how the required contribution rate is
determined (for example, by statute or by contract, or on an actuarially determined
basis) or that the plan is financed on a pay-as-you-go basis.
8. Sole and agent employers should disclose the following additional information for
each plan:
a. Information about the funded status of the plan as of the most recent valuation date
should be disclosed, including the actuarial valuation date, the actuarial value of
assets, the actuarial accrued liability, the total unfunded actuarial liability (or
funding excess), the actuarial value of assets as a percentage of the actuarial
accrued liability (funded ratio), the annual covered payroll, and the ratio of the
unfunded actuarial liability (or funding excess) to annual covered payroll.3
Employers that use the aggregate actuarial cost method should prepare this
information using the entry age actuarial cost method for that purpose only.4
b. Information about actuarial methods and assumptions used in valuations on which
reported information about the ARC, annual pension cost, and the funded status and
funding progress of pension plans is based should be disclosed, including the
following:
(1) Disclosure that the required schedule of funding progress immediately
following the notes to the financial statements presents multiyear trend
3Paragraph 22 of Statement 27 requires sole and agent employers to present as RSI (schedule of funding
progress) the same elements of information for the most recent actuarial valuation and the two preceding
valuations. 4For sole employers that include the plan in the financial reporting entity (as a trust fund), presentation of
information about the plan’s funded status and funding progress as required for the plan by Statement 25,
as amended by this Statement, meets the requirements of this paragraph and paragraph 22, as amended by
this Statement. For agent employers, the requirements of this paragraph and paragraph 22 of Statement 27,
as amended, apply to the employer’s individual plan. The information should be presented even if the
aggregate multiple-employer plan (all employers) is included as a pension trust fund in the employer’s
report and the required funded status and funding progress information is presented for the aggregate plan.
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information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits.5
(2) Disclosure that the projection of benefits for financial reporting purposes does
not explicitly incorporate the potential effects of legal or contractual funding
limitations (as discussed in the disclosure of funding policy in paragraph 7a),
if applicable.6
(3) In the disclosure of actuarial methods and significant assumptions required by
paragraph 21c of Statement 27:
(a) If the assumptions used to determine the ARC for the current year and
the information required by paragraph 8a of this Statement contemplate
different rates for successive years (year-based or select and ultimate
rates), the rates that should be disclosed are the initial and ultimate rates.
(b) If the aggregate actuarial cost method is used, disclose that because the
method does not identify or separately amortize unfunded actuarial
liabilities, information about funded status and funding progress has
been prepared using the entry age actuarial cost method for that purpose
and that the information presented is intended to serve as a surrogate for
the funded status and funding progress of the plan.
Required Supplementary Information
9. Sole and agent employers that use the aggregate actuarial cost method to determine
the ARC should prepare the information identified in paragraph 22 of Statement 27 using
the entry age actuarial cost method and should disclose that fact and that the purpose of
this disclosure is to provide information that serves as a surrogate for the funding
progress of the plan.7
10. If the cost-sharing plan in which an employer participates does not issue and make
publicly available a stand-alone plan financial report prepared in accordance with the
requirements of Statement 25, as amended, and the plan is not included in the financial
report of a public employee retirement system or another entity, the cost-sharing
5See footnote 2.
6If an employer also elects to include in the annual financial report pro forma quantitative information
about pension benefits (for example, pro forma calculations of the ARC, annual pension cost, or the funded
status of the plan) recalculated to take into consideration a funding limitation, that information should be
presented as supplementary information. 7See footnote 4.
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employer should present as RSI in its own financial report schedules of funding progress
and employer contributions for the plan (and notes to these schedules), prepared in
accordance with the requirements of Statement 25, as amended. The employer should
disclose that the information presented relates to the cost-sharing plan as a whole, of
which the employer is one participating employer, and should provide information
helpful for understanding the scale of the information presented relative to the employer.
EFFECTIVE DATE AND TRANSITION
11. With the exception of the requirements discussed in paragraph 12, the requirements
of this Statement are effective for periods beginning after June 15, 2007. Early
implementation is encouraged.
12. The requirements of paragraphs 4c, 4d, and 6 (for plans) and 8a, 8b(1), 8b(3)(b),
and 9 (for sole and agent employers) of this Statement with regard to preparation of a
schedule of funding progress using the entry age actuarial cost method and presentation
of certain information related to the actuarial calculations by pension plans and sole and
agent employers that use the aggregate actuarial cost method to determine the ARC are
effective for periods for which the financial statements and RSI contain information
resulting from actuarial valuations as of June 15, 2007, or later.
13. With regard to the provisions discussed in paragraph 12, in the initial year of
application, pension plans and sole and agent employers that use the aggregate actuarial
cost method to determine the ARC can meet the requirement of this Statement to prepare
a schedule of funding progress using the entry age actuarial cost method by presenting
the required elements of information as of the most recent actuarial valuation date. In
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subsequent years, information should be added as of subsequent actuarial valuation dates
until the requirements of Statements 25 and 27, as amended by this Statement, are met.
The provisions of this Statement need not be
applied to immaterial items.
This Statement was issued by unanimous vote of the seven members of the
Governmental Accounting Standards Board:
Robert H. Attmore, Chairman
Cynthia B. Green
William W. Holder
Edward J. Mazur
Marcia L. Taylor
Richard C. Tracy
James M. Williams
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Appendix A
BACKGROUND
14. In April and June 2004, respectively, the GASB issued standards of accounting and
financial reporting for postemployment benefits other than pensions (other
postemployment benefits, or OPEB) in Statements 43 and 45. In developing those
standards, the Board followed the same general approach taken in Statements 25 and 27
(both issued in November 1994) for pension accounting and reporting. In most cases,
Statements 43 and 45 require OPEB plans and employers that provide OPEB to present
note disclosures and RSI parallel to those required by Statements 25 and 27 for pension
plans and employers. However, in developing the OPEB Statements, the Board
concluded that disclosure and RSI requirements for OPEB should be modified at several
points to improve accountability and the decision usefulness of reported financial
information.
15. At its August 2006 meeting, the Board approved a limited-scope standards-setting
project to consider whether pension plan and employer disclosure and RSI requirements
should be amended to conform to the more recently adopted disclosure and RSI
requirements of Statements 43 and 45. As a result of that project, in December 2006, the
Board issued for comment an Exposure Draft of this Statement. The Board received 36
comment letters in response to its proposals in the Exposure Draft. Significant issues that
were raised by respondents are discussed in the Basis for Conclusions.
16. The project that resulted in this Statement proceeded concurrently with, but within a
shorter time frame than, a research project intended to review the effectiveness of
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Statements 25 and 27 in meeting the financial reporting objectives that the Board set for
them. In this Statement, the Board amends Statements 25 and 27 to strengthen note
disclosures or RSI. Broader consideration of the effectiveness of the requirements of
Statements 25 and 27 is the ongoing focus of the research project, and consideration of
any other potential modifications was deferred pending the completion of that research.
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Appendix B
BASIS FOR CONCLUSIONS
17. This appendix summarizes factors considered significant by the Board members in
reaching the conclusions in this Statement. It includes discussion of alternatives
considered and the Board’s reasons for accepting some and rejecting others. Individual
Board members may have given greater weight to some factors than to others.
Scope and Applicability
18. The scope of the pension disclosure project from which this Statement is derived
was limited to considering whether Statements 25 and 27 should be amended to conform
to certain disclosures and RSI presentations now required for OPEB.
19. In the OPEB project, the Board used the pension accounting and financial reporting
model established in Statements 25 and 27 as a foundation for the development of
standards of accounting and financial reporting for OPEB. However, in the course of
developing Statements 43 and 45, the Board concluded that the pension requirements
should be enhanced in certain respects for OPEB accounting and reporting purposes. The
modifications made for OPEB that also have resonance for pension benefits generally
relate to note disclosures and RSI, rather than to the overall approach taken to
measurement, recognition, or display.
20. This Statement is intended to bring the pension and OPEB standards with regard to
note disclosures and RSI into closer alignment as expeditiously as possible. In view of
the previous progress made on these matters in the OPEB project and the potential
benefits to financial report users of similar changes to pension reporting, the Board
concluded that these issues should be addressed concurrently with, and without waiting
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for completion of, a broader scope pension accounting and financial reporting research
project currently in progress. The Board concluded, further, that the disclosure and RSI
changes in this Statement would not necessarily limit or prejudice the matters that might
be considered in the research project.
21. In response to the Exposure Draft, the Board received comment letters that included
suggestions regarding issues that were not within the intended limited scope of the
project. The Board notes that many of the issues raised require discussion in a broader
context and, therefore, deferred discussion of those issues to the pension accounting and
financial reporting research project.
Disclosure of the Funded Status of a Defined Benefit Pension Plan
22. This Statement amends Statements 25 and 27 to require defined benefit pension
plans and sole and agent employers, respectively, to disclose the funded status of a
pension plan as of the most recent actuarial valuation date in the notes to financial
statements. This requirement is in addition to requirements in Statements 25 and 27 to
present a multiyear trend schedule of funding progress. Together, these requirements
supersede the three alternative methods of presentation (RSI, notes to financial
statements, or additional financial statement) originally permitted by footnote 18 of
Statement 25 and the two alternative methods of presentation (RSI or notes to financial
statements) originally permitted by footnote 17 of Statement 27.
23. In the Statement 25 pension plan reporting framework, multiyear trend information
about funding progress—including actuarial accrued liabilities, the actuarial values of
plan assets, total unfunded actuarial liabilities, funded ratios, covered payrolls, and
unfunded actuarial liabilities as percentages of covered payrolls—generally is required to
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be presented as RSI. That basic standard—presentation as RSI—was adopted in part as
the result of consideration by the Board of concerns from the audit community regarding
the auditing of note disclosures of funding progress (as well as employer contribution)
information from multiple past years, as originally proposed. Statement 25 also
permitted, as optional methods of communicating the information, note disclosures or an
additional financial statement. Statement 27 originally included similar requirements with
regard to the reporting of information about the funding progress of each defined benefit
plan in which a sole or agent employer participates—except that the option of presenting
funding progress information by means of an additional financial statement was not
available for employer reporting purposes.
24. Subsequently, in deliberating issues related to reporting by defined benefit OPEB
plans and by sole and agent employers in such plans, the Board reconsidered whether RSI
was an appropriate or adequate method of presentation, considering that information
about the funded status of pension plans has been widely viewed as one of the most
significant pieces of information reported about those plans, notwithstanding the method
in which it generally has been presented. Providing information to financial report users
regarding the funded status of a defined benefit plan was viewed by the Board as
essential in the context of OPEB, given the low level of funding of most postemployment
healthcare and other OPEB plans. After reviewing the history of the method(s) adopted in
Statement 25, the Board instead required in Statements 43 and 45 that OPEB plans and
sole and agent employers, respectively, report funded status/funding progress information
in the following manner:
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Disclose the funded status of the plan as of the most recent actuarial valuation date in
the notes to the financial statements
Present multiyear funding progress information as RSI
Include in the notes a reference linking the two.
25. In proposing the adoption of the same method for defined benefit pension plans and
employers in single-employer and agent multiple-employer pension plans, the Board
observed that although pension plans generally are better funded than OPEB plans, the
significance to financial report users of information about the funded status of defined
benefit pension plans in the public sector has been underscored by increased attention in
the last few years from taxpayer groups, analysts, and others. The Board reiterated its
conclusion that information about the funded status of defined benefit pension plans has
come to be widely viewed as essential financial information. The Board noted that
Concepts Statement No. 3, Communication Methods in General Purpose External
Financial Reports That Contain Basic Financial Statements (issued in April 2005,
subsequent to the issuance of Statements 43 and 45), provides that information that is
considered essential to financial statement users’ understanding of the financial
statements but that does not meet the criteria for recognition in the financial statements
should be reported in notes to the financial statements.
26. In support of the proposal to require note disclosure of the most recent available
funded status information, the Board also referred to a concern, originally discussed
during the OPEB project, that the effect on the auditor’s report of omitting a required
schedule of funding progress (or RSI generally) might not sufficiently discourage the
omission of information significant to financial report users. The Board noted that
because RSI, by definition, is not part of the basic financial statements, the omission of
funding progress information currently would not require modification of an auditor’s
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report on the basic financial statements. The Board’s concern was that mention of omitted
RSI in a subsequent paragraph of an auditor’s report (based on generally accepted
auditing standards), without modification of the auditor’s report on the basic financial
statements, might not be a compelling disincentive if an OPEB—or pension—plan or
employer was considering either not obtaining or obtaining but not presenting the RSI.
27. The Exposure Draft proposal to conform the requirements of Statements 25 and 27
to those of Statements 43 and 45 with regard to the methods of reporting information
about the funded status and funding progress of defined benefit pension plans was
intended to improve financial reporting by plans and sole and agent employers by
requiring a more appropriate method of reporting essential information about the current
funded status of the plan. At the same time, it was intended to preserve the original
benefit of presenting multiyear funding progress trend information and to help ensure that
essential information would be reported and publicly available to users.
28. Some respondents to the Exposure Draft supported the proposal to change the
required method of communicating information about the funded status of a pension plan
as of the most recent actuarial valuation. Other respondents questioned whether note
disclosure of funded status information would be consistent with the definition of, and
criteria for, notes to financial statements adopted in Concepts Statement 3, or whether the
benefit of the proposed change would exceed the cost, particularly the potential increase
in audit costs in certain cases.
29. Respondents who questioned whether the proposal to require note disclosure of
pension funded status information would be consistent with Concepts Statement 3
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pointed out that the Board adopted Concepts Statement 3 subsequent to the issuance of
Statements 43 and 45. Therefore, they thought that the Board should base the method of
communication primarily on the respective definitions of and criteria for notes to
financial statements and RSI in Concepts Statement 3, rather than on consistency with the
decisions reached in Statements 43 and 45.
30. After considering these concerns, the Board reaffirmed its conclusion that defined
benefit pension plans and sole and agent employers should disclose information about the
most recently measured funded status of the plan in the notes to financial statements—
and that a requirement to do so is consistent with the definition of and criteria for notes to
financial statements in paragraphs 35 and 36 of Concepts Statement 3. That is, paragraph
35 states that ―notes to financial statements are integral to financial statements and are
essential to a user’s understanding of financial position or inflows and outflows of
resources.‖ Paragraph 36 elaborates by stating that ―notes have a clear and demonstrable
relationship to information in the financial statements to which they pertain and are
essential to a user’s understanding of those financial statements.‖ Moreover, essential in
that context means ―so important as to be indispensable to a user (a) with a reasonable
understanding of government and public finance activities and of the fundamentals of
governmental financial reporting and (b) with a willingness to study the information with
reasonable diligence.‖
31. The Board concluded that funded status information is integrally related to—and
essential to such a user’s understanding of—financial reporting of pension plans and of
sole and agent employers in the following ways:
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a. For plan financial reporting, the Board concluded that plan net assets held in trust
for pension benefits lacks essential context without disclosure of a measure of the
actuarial accrued liabilities for which those net assets are accumulated and held in
trust.8 The Board concluded, further, that note disclosure of funded status
information is consistent with the use of notes to financial statements identified in
paragraph 35c of Concepts Statement 3—―additional information about financial
position . . . that does not meet the criteria for recognition.‖9
b. For financial reporting by sole and agent employers, the Board concluded that
information about the funded status of defined benefit pension plans in which an
employer participates is essential to a user’s understanding of financial position
because unfunded actuarial accrued liabilities for pension benefits represent an
obligation to make future sacrifices of financial resources.
32. Some respondents commented that the proposed change in method of
communicating funded status information would involve increased audit cost. Of those
respondents, some questioned whether the benefit of the proposed change would exceed
the incremental cost. The Board’s understanding, based on research of applicable
auditing standards, is that the potential incremental cost would relate to the difference
between auditing requirements related to (a) RSI and (b) establishing a basis for reliance
on the work of a specialist—the actuary. Further, the Board concluded that significant
incremental cost would be unlikely, or reduced, in situations in which auditors already
are required to use the work of a specialist—that is, audits of sole or agent employers or
audits of single-employer or agent pension plans in which the plan auditor also audits an
employer in the plan. In those situations, auditors already would have a need to establish
a basis for reliance on the work of the actuary because information from actuarial
valuations is used in expense and liability measurements and in note disclosures of the
8The requirement to disclose the funded status of the plan in the notes to financial statements eliminates the
need for the requirement of paragraph 27 of Statement 25 that the caption net assets held in trust for
pension benefits ―be followed by a parenthetical reference to the plan’s schedule of funding progress.‖ 9For reasons discussed in the Basis for Conclusions to Statement 25, the Board concluded that actuarial
accrued liabilities do not meet the criteria for recognition as liabilities of a pension plan. Moreover, the
funded status information includes plan assets valued on a different basis (actuarial value, which should be
a market-related value) than that required for financial statement purposes (including investments at fair
value).
17
employer(s). The Board concluded, therefore, that incremental auditing costs generally
would occur in plan audits in which a different auditor or auditors are responsible for
opining on employer financial statements. However, even in that circumstance, the Board
believes there may be opportunities to rely on the work of other auditors in order to
mitigate additional costs.
33. The Board concluded, on balance, that requiring note disclosure of the most recent
funded status information would result in a more appropriate method of communication
of that essential information and that the benefit of the change would exceed the cost. The
Board concluded, moreover, that:
a. Retaining the requirement for presentation of multiyear trend information about
funding progress as RSI is appropriate because information about funding progress
over time is essential for placing the basic financial statements and notes to basic
financial statements in an appropriate economic and historical context.
b. The overlap between the note disclosure and RSI requirements with regard to the
most recent funded status information is appropriate in order to communicate
essential information.
34. After discussion of related respondent comments, the Board also decided to retain
in this Statement a related proposal to require disclosure in notes to financial statements
―that the required schedule of funding progress immediately following the notes to the
financial statements presents multiyear trend information about whether the actuarial
value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liability for benefits‖ [paragraphs 4d(1) and 8b(1)]. The Board reaffirmed that the
purpose of the disclosure would be to provide an informative link from the funded status
information disclosed in the notes to financial statements as of the most recent actuarial
valuation date to the funding progress trend information presented as RSI. Concerns were
expressed by some respondents that such a link could create confusion regarding the
18
status of the information presented as RSI, including auditor association with that
information. To address those concerns, the Board added a footnote in the standards
section clarifying that the required link to RSI does not imply incorporation of the RSI
into the notes to financial statements by reference.
Required Reporting of Funded Status/Funding Progress Information When the
Aggregate Actuarial Cost Method Is Used to Determine the ARC
35. This Statement amends Statements 25 and 27 to require that defined benefit plans
and sole and agent employers, respectively, that use the aggregate actuarial cost method
to determine the ARC disclose the funded status of the plan and present multiyear
funding progress trend information as RSI using the entry age actuarial cost method as a
surrogate for that purpose only.
36. That requirement was adopted in Statements 43 and 45 and proposed as an
amendment to Statements 25 and 27 because the aggregate actuarial cost method does not
calculate an actuarial accrued liability and, for that reason, does not produce information
necessary to prepare a schedule of funding progress or a note disclosure of funded status.
Even so, the aggregate method has been included among the acceptable actuarial cost
methods for accounting and financial reporting by pension and OPEB plans and
employers, based on its strength as a funding methodology if an employer consistently
contributes the ARC determined using that method. During OPEB project discussions,
however, the Board viewed more critically than it had previously the significance of the
method’s inability to support the presentation of information about a defined benefit
plan’s funded status and funding progress, as discussed in paragraphs 110–112 of the
Basis for Conclusions to Statement 43:
19
Aggregate actuarial cost method
The aggregate actuarial cost method cannot be used to prepare a
schedule of funding progress because it does not separately determine
actuarial accrued liabilities. (The total actuarial present value of projected
benefits is amortized as normal cost over average remaining service life,
rather than dividing the total into normal cost and actuarial accrued
liabilities and separately amortizing the two amounts over, generally,
different periods.) In Statement 25, the Board exempted pension plans that
use the aggregate method from preparing the schedule of funding progress
(but not from preparing the schedule of employer contributions), although
preparation of the schedule of funding progress using another method,
such as entry age, is acceptable. The Board concluded in that Statement
that ―a requirement to use a different method would be inconsistent with
the general approach of [Statement 25] to require application of the
method used to determine funding requirements, when that method meets
the parameters.‖ Moreover, the Board noted that ―relatively few [pension]
plans use the aggregate method; for example, 6 percent of 451 [pension]
plans included in a survey conducted in 1993 by the Public Pension
Coordinating Council reported using that method, and most are small
plans. The Board is reluctant to impose additional costs on those [pension]
plans‖ (paragraph 124, footnote omitted).
The Board notes, however, that when the pension standards were
adopted, a large majority of pension plans had been advance-funding on
an actuarially determined basis for many years. Thus, the unfunded
actuarial accrued liabilities of plans using the aggregate actuarial cost
method effectively were being included in funding requirement
determinations, even though they were not separately calculated. In
contrast, very few OPEB plans currently are advance-funded on an
actuarially determined basis. It is not possible at this time to reliably
estimate what proportion of OPEB plans might select the aggregate
actuarial cost method (a) for funding purposes or (b) solely for financial
reporting purposes if they remain unfunded. The Board concluded that if
an unfunded (for example, pay-as-you-go) OPEB plan selected the
aggregate actuarial cost method solely for financial reporting purposes
(that is, unfunded actuarial accrued liabilities effectively were not being
included in funding requirement determinations), exempting the plan from
preparing a schedule of funding progress would leave users without
sufficient information to assess the financial effects of the plan’s method
of financing. Therefore, the Board concluded that plans that elect to use
the aggregate method should be required to prepare a schedule of funding
progress using an acceptable actuarial cost method that separately
identifies actuarial accrued liabilities. The Board believes it is unnecessary
to allow a choice of methods for that limited purpose. The Board selected
the entry age method as the required method because it is conceptually
similar to the aggregate method.
20
The Board acknowledges that a requirement to use entry age for the
schedule of funding progress when the aggregate method is used for other
accounting information is a departure from the general approach of this
Statement and the related Statement. Nevertheless, for the reasons stated
above, the Board believes that funded status information based on the
entry age method is more useful to users of OPEB plan financial reports
than providing no information about funded status. Moreover, the
potential for confusion for users due to the use of two different methods
can be mitigated by disclosure of the reason the entry age method is used
for the schedule of funding progress only—that is, that it cannot be
prepared using the aggregate method. Most respondents to the plan
Exposure Draft who commented on this issue concurred with the Board’s
position to require disclosure of information about funded status and
funding progress using the entry age method. The Board reiterates that the
aggregate method is required for determining the employer’s ARC when
that method is used for funding; it is not acceptable under this Statement
or the related Statement to use entry age or another method for
determining the ARC when the aggregate method is used for funding.
Similarly, when the aggregate method is used for determining the ARC,
the schedule of employer contributions should be computed using that
method.
37. The change adopted in Statements 43 and 45 was based on the view that the
presentation of funded status and funding progress information is so basic to achievement
of the financial reporting objectives of the OPEB Statements that it should be required,
without regard to which actuarial cost method has been used to determine the ARC. In
proposing the same change for pension reporting, the Board tentatively concluded that
the same perspective applies there, as well. As discussed previously, the Board believes
that funded status and funding progress information is considered essential by pension
plan financial report users. Moreover, based on observations made after the
implementation of Statements 25 and 27, the Board tentatively concluded that the
absence of that information could be misinterpreted by financial report users. The Board
also noted that it would be difficult, if not impossible, for even reasonably
knowledgeable, diligent financial report users having an interest in pensions to estimate
funding progress if an employer had not contributed to the plan on a consistent basis an
21
amount equal to the ARC determined using the aggregate actuarial cost method. The
Board expressed the belief that the requirements of this Statement for reporting of funded
status and funding progress information using the entry age actuarial cost method as a
surrogate could avoid questions about where a defined benefit plan stands,
approximately, with regard to funding.
38. In proposing the change, the Board noted that recent information confirms that
relatively few pension plans use the aggregate method, and for those that do, the
proposed change would involve an incremental actuarial cost to calculate the surrogate
actuarial accrued liabilities and funded status of the plan using the entry age actuarial cost
method for that purpose. The Exposure Draft reflected the Board’s tentative conclusion
that the benefit of the information to the users of those plans’ financial reports would
exceed the incremental cost to those plans to produce the information.
39. Some respondents to the Exposure Draft agreed that current reporting for pension
plans that use the aggregate actuarial cost method to determine the ARC does not provide
a basis for understanding the funded status of the plan and that requiring presentation of
estimated funded status information using the entry age actuarial cost method would be
appropriate and useful. Some, however, questioned the tentative decision to specify use
of the entry age actuarial cost method for that purpose, rather than allow a range of
choices, which Statements 25 and 27 permits for other uses. Others who disagreed with
the proposal questioned the benefit of requiring funded status information prepared using
an actuarial cost method different from that used to manage the plan or whether the
benefit would exceed the cost of preparing the information. One respondent also
commented that because entry age would only approximate what the funded status using
22
the aggregate actuarial cost method (if knowable) would be, an unintended result could
be the disclosure of funded status information that could be misused to support a level of
employer contributions lower than the level determined using the aggregate method, in
some circumstances.
40. After discussion of the respondents’ comments, the Board reaffirmed its tentative
conclusions that:
a. The funded status of a defined benefit pension plan is essential information.
b. Because the aggregate actuarial cost method does not measure funded status, the
use of a surrogate method to present the funded status of a plan is appropriate.
c. Considerations underlying the Board’s decision to permit the use of one of several
actuarial cost methods (including aggregate) to determine the ARC do not apply to
the selection of a method to serve as a surrogate for the aggregate method with
regard to presentation of funded status information.
41. For plans and sole and agent employers that use the aggregate method for
determining the ARC, the Board concluded that the benefit of reporting the funded status
and funding progress of the plan using the entry age actuarial cost method as a surrogate
exceeds the incremental cost of producing that information. However, the Board decided
not to require such plans and employers to obtain that information for actuarial valuations
as of dates prior to June 15, 2007, as discussed in paragraph 56.
42. The Board acknowledges that the aggregate actuarial cost method can be a
relatively more aggressive funding method than entry age if an employer consistently
makes the contributions determined on that basis. As a result, it is conceivable that a user
might infer from the surrogate funded status information disclosed that an employer
contribution less than the ARC determined using the aggregate actuarial cost method
would be sufficient to fund the plan. As observed by one respondent, this situation arose
when Statement No. 5, Disclosure of Pension Information by Public Employee
23
Retirement Systems and State and Local Governmental Employers, required disclosure of
a standardized measure of the pension obligation calculated using the projected unit
credit method. The Board notes, however, that because both the entry age actuarial cost
method and the aggregate actuarial cost method are cost-allocation approaches, the
funded status information required by this Statement will be a closer surrogate than was
the information resulting from the use of the projected unit credit method (a benefit-
allocation approach) required by Statement 5. Moreover, this Statement requires that the
purpose of disclosing funded status information using the entry age method—as a
surrogate for the plan’s funded status—be disclosed, and a financial-statement preparer is
not precluded from including additional explanatory information in notes to the financial
statements if it is perceived as clarifying the actuarial information presented.
Explanatory Disclosures Regarding the Actuarial Measurement Process
43. In the Exposure Draft, the Board proposed amendments to Statements 25 and 27
that would incorporate from Statements 43 and 45, respectively, disclosure of specified
information about actuarial methods and assumptions used in valuations on which
reported information about the ARC and the funded status and funding progress of
pension plans are based. The proposed disclosures included the following disclosures of
an explanatory nature regarding the nature of the actuarial methodology used in the
measurement process for accounting and financial reporting purposes:
Disclosure that actuarial valuations involve estimates of the value of reported
amounts and assumptions about the probability of events far into the future, and that
actuarially determined amounts are subject to continual revision as actual results are
compared to past expectations and new estimates are made about the future.
Disclosure that actuarial calculations reflect a long-term perspective and, if
applicable, that consistent with that perspective, actuarial methods and assumptions
used include techniques that are designed to reduce short-term volatility in actuarial
accrued liabilities and the actuarial value of assets.
24
44. The Board’s basis for requiring the preceding explanatory note disclosures for
OPEB plans and employers related, in part, to financial report users’ lack of familiarity
with the use of actuarial concepts in the measurement of OPEB costs and obligations, in
contrast to pension costs and obligations. The Board referred again to that difference in
paragraph 33 of the Exposure Draft of this Statement but explained its tentative
conclusion in favor of requiring the same explanatory disclosures for pension plans and
employers as follows:
As discussed in the preceding Basis for Conclusions of Statements 43
and 45, financial report users generally are more familiar with the
application of actuarial valuation concepts derived from funding practice
to pension reporting than they are with the application of those same
concepts to OPEB reporting. However, the Board also notes that some
users of the pension information reported by plans and employers are
more familiar than others with the measurement approach taken for
financial reporting by state and local governmental pension plans.
Accordingly, the Board has concluded that requiring narrative disclosures
of an informative nature regarding the pension measurement process could
have the benefit of better informing the user community.
45. Although some respondents to the Exposure Draft supported the Board’s proposal,
others questioned whether the disclosures quoted in paragraph 43, above, which are of a
general explanatory or educational nature are essential to an understanding of the basic
financial statements by a user with the degree of background and diligence described in
paragraph 36 of Concepts Statement 3 (discussed previously in paragraph 30). After
considering respondents’ comments, the Board concluded that although the explanatory
disclosures in question are potentially useful to some financial report users, in the context
of pension reporting, they do not meet the criteria for disclosure in notes to the financial
statements. Therefore, the Board decided not to include those proposed disclosure
requirements in this Statement.
25
Disclosure of the Basis for Determining Contractually Required Contributions to a
Cost-Sharing Plan
46. This Statement amends Statement 27 to conform to the requirement of paragraph
24b(3) of Statement 45 that a cost-sharing employer disclose ―how the [contractually]
required contribution rate is determined (for example, by statute or by contract, or on an
actuarially determined basis) or that the plan is financed on a pay-as-you-go basis.‖ This
requirement reflects the Board’s intent to help users of a cost-sharing employer’s
financial report place in perspective the implications of the employer’s paying its
contractually required contributions to the plan. Although all the employers in a cost-
sharing pension plan might regularly pay 100 percent of their contractually required
amounts, if the contractually required contributions assessed by the plan are determined
based on something other than the ARC and are insufficient to fund the benefits, financial
statement users may be unaware of that fact without proper disclosure.
47. The Board’s understanding with regard to pension practice has been that cost-
sharing pension plans generally set the contractually required contribution either equal to
the ARC or, if not, at least with a strong funding objective. That is not to say, however,
that all cost-sharing pension plans necessarily set contractually required contribution rates
equal to or approximating the ARC, or that there are no instances, or there is no future
possibility, of cost-sharing pension plans in which the contractually required contribution
rates are assessed in a way that significantly departs from the ARC. The amendments to
Statement 27 to conform to the disclosure change made in Statement 45 require that cost-
sharing employers disclose to users of their financial reports relevant information about
the financing policy of the plan, regardless of individual plan circumstances. In some
cases, that disclosure could alert users of a cost-sharing employer’s financial report to
26
obtain a copy of the plan’s financial report in order to investigate further the funded
status and funding progress of the cost-sharing plan as a whole and assess the impact of
that information on potential demands on employer cash flows in future years.
Respondents to the Exposure Draft who commented on this issue generally supported the
additional disclosure requirement.
Requirement That Certain Cost-Sharing Employers Present RSI for the Plan
48. This Statement amends Statement 27 to conform to the requirement of Statement 45
that a cost-sharing employer present RSI for the cost-sharing plan as a whole in the
employer’s financial report, if the plan does not issue a publicly available stand-alone
financial report compliant with the requirements of Statement 25 (as amended) and
including RSI, or the plan is not included in the financial report of a public employee
retirement system or other entity. This change reflects the Board’s intent that users of a
cost-sharing employer’s financial report be able to obtain information about the funded
status and funding progress of the cost-sharing pension plan and the percentage of the
ARC represented by contractually required contributions recognized by the plan, even if
the plan does not issue a financial report prepared in conformity with generally accepted
accounting principles (GAAP).
49. Paragraphs 147 and 165 of the Basis for Conclusions to Statement 45 discuss the
Board’s decision on this point, in the context of cost-sharing OPEB employers, as
follows:
The Board believes . . . that users need information about the cost of
the commitment to provide benefits to members of OPEB plans and the
extent to which the employers’ contributions cover that cost, whether the
cost is attributable to individual employers (single-employer and agent
plans) or is pooled (cost-sharing plans), and regardless of how
27
contributions assessed to the employers are determined. Therefore,
Statement 43 requires cost-sharing plans to measure and report the total
ARC (all employers) in the schedule of employer contributions in the
same manner required of single-employer and agent plans. All plans
should include in that schedule the percentage of the ARC recognized by
the plan as contributions, for each year included in the schedule. Similarly,
the Board believes that users need information about the funded status and
funding progress of the plan, regardless of the type of plan. For that
reason, Statement 43 requires cost-sharing plans to report a schedule of
funding progress in the same manner required of single-employer and
agent plans.42
This Statement adds a requirement that cost-sharing employers present
schedules of funding progress and employer contributions for the plan, if
the plan does not issue and make publicly available a plan financial report
prepared in accordance with the requirements of Statement 43 on OPEB
plan reporting and the plan is not included in the financial report of a
PERS or another entity. This requirement reflects consideration that the
OPEB plan financial reporting laws and practices are in a formative stage
and recognizes the possibility that some plans may not issue financial
reports prepared in accordance with generally accepted accounting
principles. If so, without the required disclosure in the employer’s report,
financial report users would not have access to information about the
funded status and funding progress of a cost-sharing plan, or employer
contributions in comparison to the ARC.
_____________________________
42In addition, as discussed in paragraphs 159 and 160, this Statement requires cost-
sharing employers to disclose the basis on which contractually required contributions
were determined. As discussed in paragraph 165, this Statement also requires cost-
sharing employers to present schedules of funding progress and employer contributions
for the plan (all employers) as required supplementary information (RSI) in the
employers’ reports, if the plan does not issue and make publicly available a GAAP-
compliant financial report that includes that information and the plan is not included in
the financial report of a PERS or another entity.
50. The Board recognizes that, generally, the larger cost-sharing pension plans,
including those administered by the states, issue plan financial reports prepared in
conformity with Statement 25, including presenting the required schedules of funding
progress and employer contributions. However, the preceding financial reporting practice
may not apply to all cost-sharing pension plans. By its nature, the requirement that a cost-
sharing employer provide plan RSI if the pension plan does not applies on an as-needed
28
basis to provide report users access to the information of which they otherwise would be
deprived—and if not needed imposes no additional requirement.
Additional, Amplified, or Clarified Note Disclosure Requirements
51. This Statement amends Statement 25 to conform to the amplified disclosure
requirement of Statement 43 regarding how the fair value of plan investments was
determined. Paragraph 30b(2) of Statement 43 added that the disclosure of fair-value
methodology should include ―the methods and significant assumptions used to estimate
the fair value of investments, if that fair value is based on other than quoted market
prices.‖ The Board believes that the same added specificity clarifies the disclosure for
pension plans as well.
52. This Statement amends Statements 25 and 27 to conform to the requirements of
Statements 43 and 45 to disclose legal or contractual maximum contribution rates, if
applicable, and to disclose, further, that such maximum contribution rates, if applicable,
are not explicitly taken into consideration in the projection of benefits for accounting
purposes. The amendment to Statement 25 includes the stipulation in footnote 13 of
Statement 43 that if a plan elects to present pro forma quantitative information taking
maximum contribution rates into effect, it should be presented as supplementary
information. These requirements may not have broad applicability to pension plans.
However, the Board believes that the additional contribution rate disclosures are relevant
and useful for pension plans and employers to which they do apply.
53. This Statement amends Statements 25 and 27 to conform to the requirements of
Statements 43 and 45 that, when select and ultimate assumptions are used, an OPEB plan
or employer should disclose the initial rate as well as the ultimate rate. That requirement
29
was made in consideration of the requirement to use select and ultimate assumptions for
the healthcare cost trend rate in actuarial valuations of postemployment healthcare plans.
Statements 25 and 27 originally required disclosure only of the ultimate rates, when
economic assumptions are made in terms of select and ultimate rates. The change
conforms the two sets of requirements. The Board believes that the incremental cost
associated with this disclosure will be negligible.
54. Comments received from respondents to the Exposure Draft with regard to the
additional note disclosures discussed in paragraphs 51–53 generally agreed with the
additional disclosure requirements.
Effective Date and Transition Provisions
55. With the exception of certain provisions related to plans and employers that use the
aggregate actuarial cost method, the effective date of the requirements of this Statement
is for periods beginning after June 15, 2007. That timing reflects the Board’s intent that
the benefits of the changes to note disclosures and RSI be provided to financial report
users as soon as possible and its belief that the effective date is feasible for financial
statement preparers. The Board notes that the note disclosure and RSI changes required
by this Statement are not extensive and generally involve information that either already
is reported in some fashion or already is available to financial statement preparers.
56. The Exposure Draft proposal would have required pension plans and sole and agent
employers that use the aggregate actuarial cost method to determine the ARC to obtain
from their actuaries funded status information prepared using the entry age actuarial cost
method prior to the issuance of plan or employer annual financial reports for years ending
June 30, 2008, or thereafter. Several respondents to the Exposure Draft noted that
30
because of the parameters of Statements 25 and 27 with regard to the timing and
frequency of actuarial valuations, in order to comply with the requirements of the
Exposure Draft, some plans and employers would have to obtain additional actuarial
calculations with regard to actuarial valuations that already had been completed. Those
respondents raised concerns about the potential cost of obtaining the required
information. To address the concerns raised by these respondents, the Board modified the
requirements so that the presentation of funded status information by plans and
employers that use the aggregate actuarial cost method is effective for financial
statements that include information resulting from actuarial valuations as of June 15,
2007, or later. This change avoids the need for obtaining additional actuarial services
related to completed valuations that otherwise would meet the requirements of Statement
25 or Statement 27.
57. In addition, to reduce the cost of implementation for plans and employers that use
the aggregate actuarial cost method to determine the ARC, the Board included in the
Exposure Draft a proposed transition provision to allow funding progress information to
be presented only for the most recent actuarial valuation reported in the initial period of
implementation. The Board retained that transition provision in this Statement, and,
therefore, plans or employers in that situation can build a multiyear schedule of funding
progress prospectively as additional actuarial valuations are obtained and the results
reported.
58. Employers in cost-sharing pension plans for which financial statements and RSI
prepared in conformity with the requirements of Statement 25 are not issued and publicly
available have at a minimum one year to obtain the required schedules from the plan for
31
inclusion in the employers’ reports. Some respondents to the Exposure Draft suggested
that additional time be provided for employers in this circumstance because of the
potential difficulty and cost of obtaining information needed to comply with the
requirements of the Statement prior to the effective date. The Board acknowledges that in
the event that a cost-sharing plan has not obtained actuarial valuations prepared in
conformity with the parameters of Statement 25, an employer in such a plan that reports
in conformity with the requirements of Statement 27 may find it difficult to comply with
this requirement in a timely manner. However, the Board believes that if such a
combination of circumstances exists, additional time to comply with the requirements
would not significantly diminish the difficulties faced by those employers and would
result in delayed presentation of information that it believes to be essential to users of the
financial statements. Therefore, this Statement does not provide for delayed
implementation of the requirements for those cost-sharing employers.
32
Appendix C
ILLUSTRATIVE NOTE DISCLOSURES AND REQUIRED SUPPLEMENTARY
INFORMATION
59. This paragraph illustrates the requirements of this Statement. The facts assumed in
these examples are illustrative only and are not intended to modify or limit the
requirements of this Statement or to indicate the GASB’s endorsement of the policies or
practices shown. Existing standards may require disclosures in addition to those
illustrated.
Illustrations 2 and 3 of this appendix update Illustrations 1 and 3, respectively, in
Appendix C of Statement 25 for certain effects of this Statement. Illustrations 1 and 4–7
of this appendix update Illustrations 1–5, respectively, in Appendix D of Statement 27 for
certain effects of this Statement. The employers in Illustrations 4–6 participate in the
retirement system for which note disclosures and required supplementary
information (RSI) are presented in Illustration 2. Accordingly, the illustrations for those
employers and for the plan reflect a common information base. (Note that the name of the
retirement system in Illustrations 2 and 4–6 has been changed from that used in
Statements 25 and 27. However, unless otherwise noted, the facts and circumstances
depicted in those illustrations do not differ from the facts and circumstances originally
illustrated in Statements 25 and 27.)
Illustration 1: Summary of Note Disclosures and RSI for Employer Reporting (Including
Pension Trust Funds)
Illustration 2: Notes to the Financial Statements and RSI for a Defined Benefit Pension
Plan
Illustration 3: Notes to the Financial Statements for a Defined Contribution Pension Plan
Illustration 4: Notes to the Financial Statements for an Employer Contributing to a
Single-Employer Defined Benefit Pension Plan
Illustration 5: Notes to the Financial Statements for an Employer Contributing to a Cost-
Sharing Multiple-Employer Defined Benefit Pension Plan
33
Illustration 6: Notes to the Financial Statements for an Employer Contributing to an
Agent Multiple-Employer Defined Benefit Pension Plan
Illustration 7: Notes to the Financial Statements for an Employer with Three Single-
Employer Defined Benefit Pension Plans
Illustration 1—Summary of Note Disclosures and RSI for Employer Reporting
(Including Pension Trust Funds)
This illustration updates the information contained in Illustration 2 of Statement 25 and
Illustration 1 of Statement 27 for the effects of this Statement. The table that follows
identifies the note disclosure and RSI requirements of Statements 25, 27, and 50 that are
applicable for employer reporting (including the reporting of pension trust funds in the
employer’s financial report) in various reporting circumstances.
To use this chart to identify the note disclosure and RSI requirements of Statements 25,
27, and 50 that apply to its reporting circumstance, an employer should (1) identify the
row that corresponds to the manner in which the pension plan is reported (using the two
leftmost columns of the table) and (2) locate the columns that correspond to the
employer’s classification (sole, agent, or cost-sharing) with regard to the type of plan in
which it participates (using the top row of the table). The boxes in the chart that are
located at the intersection of the row and columns identified in steps (1) and (2) indicate
the paragraphs of Statements 25, 27, and 50 that apply. Other standards may require
note disclosures and RSI in addition to those identified in this illustration, and the
information in this illustration is in no way intended to limit the applicability of other
standards or requirements. Note that all stand-alone plan reports are required to include
full notes and RSI. (See Statement 25, ¶32 and ¶33–¶40, and Statement 50, ¶4 and ¶6.)
34
Sole Employer Agent Employer Cost-Sharing Employer
Manner in Which the
Plan Is Reported Employer Reporting
Reporting of PTF in the
Employer’s Report Employer Reporting
Reporting of PTF in the
Employer’s Report Employer Reporting
Reporting of PTF in the
Employer’s Report
Employer
Report
Includes
Pension
Trust Fund
(PTF)
Plan
Issues
Stand-
Alone
Report Notes RSI Notes RSI Notes RSI Notes RSI Notes RSI Notes RSI
YES
YES
GASBS 27, ¶20 and ¶21
GASBS 50, ¶7a and ¶8
GASBS 25,
¶32a(1),
¶32b, ¶32c(4), and
¶32d
GASBS 50,
¶4a
GASBS 25,
¶33–¶40 (Reduced)10
GASBS 50, ¶6
GASBS 27, ¶20 and ¶21
GASBS 50, ¶7a and ¶8
GASBS 27, ¶2212
GASBS 50, ¶9
GASBS 25,
¶32a(1),
¶32b, ¶32c(4), and
¶32d
GASBS 50,
¶4a
GASBS 27, ¶20
GASBS 50, ¶7
GASBS 25,
¶32a(1),
¶32b, ¶32c(4), and
¶32d
GASBS 50,
¶4a
NO
GASBS 25,
¶32 (Full)
GASBS 50,
¶4
GASBS 25, ¶33–¶40
(Full)11
GASBS 50,
¶6
GASBS 25,
¶32 (Full)
GASBS 50,
¶4
GASBS 25, ¶33–¶40
(Full)13
GASBS 50,
¶6
GASBS 25,
¶32 (Full)
GASBS 50,
¶4
GASBS 25, ¶33–¶40
(Full)11
GASBS 50,
¶6
NO
YES
GASBS 27,
¶2210
GASBS 50,
¶9
NO
GASBS 50,
¶10
____________________
10Comprises a schedule of funding progress for at least three valuations.
11Comprises a schedule of funding progress and a schedule of employer contributions for each of the past six consecutive fiscal years of the plan and RSI notes.
12Comprises a schedule of funding progress for at least three valuations for the employer’s individual plan.
13Comprises a schedule of funding progress and a schedule of employer contributions for each of the past six consecutive fiscal years of the plan and RSI notes for the aggregate (all employers) plan.
35
Illustration 2—Notes to the Financial Statements and RSI for a Defined Benefit
Pension Plan
This illustration updates Illustration 1 of paragraph 153 of Statement 25 for certain effects
of this Statement and includes notations related to the requirements of this Statement. The
information in this illustration relates to the retirement system in which the employers in
Illustrations 4–6 participate. Note that in this illustration, there are no legally required
reserve accounts, no investment concentrations, and no differences between required and
actual contributions.
Kremer Retirement System
Notes to the Financial Statements
for the Fiscal Year Ended December 31, 20X2
The Kremer Retirement System (KRS) administers three defined benefit pension plans—
State Employees Pension Plan (SEPP), School District Employees Pension Plan (SDEPP),
and Municipal Employees Pension Plan (MEPP). Although the assets of the plans are
commingled for investment purposes, each plan’s assets may be used only for the payment
of benefits to the members of that plan, in accordance with the terms of the plan.
A. Summary of Significant Accounting Policies
Basis of Accounting. KRS’s financial statements are prepared using the accrual basis
of accounting. Plan member contributions are recognized in the period in which the
contributions are due. Employer contributions to each plan are recognized when due and the
employer has made a formal commitment to provide the contributions. Benefits and refunds
are recognized when due and payable in accordance with the terms of each plan.
Method Used to Value Investments. Investments are reported at fair value. Short-term
investments are reported at cost, which approximates fair value. Mortgages are valued on the
basis of future principal and interest payments and are discounted at prevailing interest rates
for similar instruments. The fair value of real estate investments is based on independent
appraisals. Fair value of other securities is determined by the mean of the most recent bid
and asked prices as obtained from dealers that make markets in such securities. Investments
for which market quotations are not readily available are valued at their fair values as
determined by the custodian under the direction of the KRS Board of Trustees, with the
assistance of a valuation service.
Paragraph 4a
of this
Statement
requires that
plans disclose
the methods
and significant
assumptions
used to
estimate the
fair value of
investments, if
that fair value
is based on
other than
quoted market
prices.
36
B. Plan Descriptions and Contribution Information
Membership of each plan consisted of the following at December 31, 20X1, the date of
the latest actuarial valuation:
SEPP SDEPP MEPP
Retirees and beneficiaries receiving benefits 15,274 17,337 1,857
Terminated plan members entitled to, but
not yet receiving, benefits 1,328 1,508 162
Active plan members 38,292 61,004 3,481
Total 54,894 79,849 5,500
Number of participating employers 1 203 53
State Employees Pension Plan
Plan Description. SEPP is a single-employer defined benefit pension plan that covers
the employees of the state including all departments and agencies. SEPP provides
retirement, disability, and death benefits to plan members and their beneficiaries. Cost-of-
living adjustments (COLAs) are provided at the discretion of the state legislature. Article 29
of the Regulations of the state of Kremer assigns the authority to establish and amend the
benefit provisions of the plan to the state legislature.
Contributions. Plan members are required to contribute 7.8 percent of their annual
covered salary. The state is required to contribute at an actuarially determined rate. Per
Article 29, contribution requirements of the plan members and the state are established
and may be amended by the state legislature. Article 29(d) states that the employer
contribution rate may not exceed 14 percent of payroll. Administrative costs of SEPP are
financed through investment earnings.
School District Employees Pension Plan
Plan Description. SDEPP is a cost-sharing multiple-employer defined benefit pension
plan that covers teaching-certified employees of participating school districts. SDEPP
provides retirement, disability, and death benefits to plan members as well as an annual
COLA. Article 30 of the Regulations of the state of Kremer assigns the authority to establish
and amend benefit provisions to the SDEPP Board of Trustees.
Contributions. Plan members are required to contribute 7.6 percent of their annual
covered salary. Participating school districts are required to contribute at actuarially
determined rates. Per Article 30, contribution requirements of the plan members and the
participating employers are established and may be amended by the SDEPP Board of
Trustees. Administrative costs of SDEPP are financed through investment earnings and an
assessment of 0.18 percent of covered payroll for each participating school district.
Long-Term Receivables. In addition to actuarially determined contributions, certain
employers also make semi-annual installment payments, including interest at 8 percent per
Paragraph 4b
of this
Statement
requires plans
to disclose
legal or
contractual
maximum
contribution
rates, if
applicable.
37
year, for the cost of service credit granted retroactively to employees when the employers
initially joined MEPP. As of December 31, 20X2 and 20X1, the outstanding balances were
$986 and $1,088, respectively. These payments are due over various time periods not
exceeding 10 years at December 31, 20X2, and 11 years at December 31, 20X1.
Municipal Employees Pension Plan
Plan Description. MEPP is an agent multiple-employer defined benefit pension plan
that covers general and public safety employees of political subdivisions of the state of
Kremer that have elected to participate in MEPP. Benefit provisions are established by each
participating employer when the employer elects to participate in MEPP. Benefit provisions
may be amended by the individual participating employers. MEPP provides retirement,
disability, and death benefits to plan members and beneficiaries. An annual COLA is
provided to benefit recipients of employers that contract for this option. At December 31,
20X1, the date of the most recent actuarial valuation, there were 53 participating employers
consisting of:
Cities 16
Townships 15
Counties 10
Special districts 12
Total 53
Contributions. Contribution rates for each participating employer and its covered
employees are established and may be amended by the MEPP Board of Trustees. The
contribution rates are determined based on the benefit structure established by each
employer. Plan members are required to contribute between 4 and 12 percent of their annual
covered salary. Participating employers are required to contribute the remaining amounts
necessary to finance the coverage of their employees through periodic contributions at
actuarially determined rates. Administrative costs of MEPP are financed through investment
earnings and an assessment of $20 per participating active plan member per year.
38
C. Funded Status and Funding Progress—Pension Plans
The funded status of each plan as of December 31, 20X1, the most recent actuarial
valuation date, is as follows (dollar amounts in thousands):
Actuarial UAAL as a
Actuarial Accrued Unfunded Percentage
Value of Liability (AAL) AAL Funded Covered of Covered
Assets —Entry Age (UAAL) Ratio Payroll Payroll
(a) (b) (b – a) (a / b) (c) ((b – a) / c)
SEPP $ 3,658,323 $ 4,284,961 $ 626,638 85.4% $ 1,156,346 54.2%
SDEPP 5,269,502 5,709,764 440,262 92.3 1,546,650 28.5
MEPP 549,696 559,367 9,671 98.3 209,715 4.6
The schedules of funding progress, presented as required supplementary information
(RSI) following the notes to the financial statements, present multiyear trend information
about whether the actuarial values of plan assets are increasing or decreasing over time
relative to the AALs for benefits.
Paragraph 4c
of this
Statement
requires that
the illustrated
funded status
information be
disclosed as of
the most
recent
actuarial
valuation date.
Paragraph
4d(1) of this
Statement
requires that
the plan
include
disclosure
indicating that
multiyear
funding
progress
information is
presented as
RSI.
In this illustration, the plans use the entry age actuarial cost method for purposes of
calculating the annual required contributions of the employers (ARCs). However, if
the ARCs were calculated using the aggregate actuarial cost method, the plan would
be required by paragraph 4c of this Statement to present current-year funded status
information calculated using the entry age actuarial cost method and would be
required by paragraph 4d(3)(d) of this Statement to disclose that because the
aggregate actuarial cost method does not identify or separately amortize unfunded
actuarial liabilities, information about the plan’s funded status and funding progress
has been prepared using the entry age actuarial cost method for that purpose, and that
the information presented is intended to serve as a surrogate for the funded status and
funding progress of the plan.
39
Additional information as of the latest actuarial valuation follows:
SEPP SDEPP MEPP
Valuation date 12/31/X1 12/31/X1 12/31/X1
Actuarial cost method Entry age Entry age Entry age
Amortization method Level percent Level percent Level percent
open closed closed
Remaining amortization period 23 years 15 years Weighted average
of 25 years
Asset valuation method 4-year 4-year 4-year
smoothed market smoothed market smoothed market
Actuarial assumptions:
Investment rate of return* 7.5% 7.5% 7.5%
Projected salary increases* 5.5–9.5% 5.5–11.5% 5.5–11.5%
COLAs None 1/2 CPI increase, 1–3%
maximum of 3%
*Includes inflation at 5.5% 5.5% 5.5%
For financial reporting purposes, the projection of benefits for SEPP does not
explicitly incorporate the potential effects of the legal limit on employer contributions
disclosed in Note B.
In this illustration,
year-based rates
were not used.
However, if the
economic
assumptions had
contemplated
different rates for
successive years,
the plan would be
required by
paragraph 4d(3)(c)
of this Statement to
disclose the initial
and ultimate rates.
Paragraph 4d(3) of this Statement
requires plans to disclose information
about the actuarial methods and
significant assumptions used to
determine the ARC for the current year
and funded status information.
Because there is a legal funding limit for SEPP,
paragraph 4d(2) of this Statement requires that the
plan disclose that the actuarial valuation does not
explicitly consider the effects of the limitation in
the projection of benefits.
40
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULES OF FUNDING PROGRESS
(Dollar amounts in thousands)
Actuarial UAAL as
Actuarial Accrued Unfunded a Percentage
Actuarial Value of Liability (AAL) AAL Funded Covered of Covered
Valuation Assets —Entry Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b – a) (a / b) (c) ((b – a) / c)
SEPP
12/31/W6 $2,005,238 $2,626,296 $621,058 76.4% $ 901,566 68.9%
12/31/W7 2,411,610 2,902,399 490,789 83.1 956,525 51.3
12/31/W8 2,709,432 3,331,872 622,440 81.3 1,004,949 61.9
12/31/W9* 3,001,314 3,604,297 602,983 83.3 1,049,138 57.5
12/31/X0 3,366,946 3,930,112 563,166 85.7 1,093,780 51.5
12/31/X1 3,658,323 4,284,961 626,638 85.4 1,156,346 54.2
SDEPP
12/31/W6 $2,888,374 $3,499,572 $ 611,198 82.5% $1,205,873 50.7%
12/31/W7 3,473,718 3,867,483 393,765 89.8 1,279,383 30.8
12/31/W8 3,902,705 4,439,761 537,056 87.9 1,344,151 40.0
12/31/W9* 4,323,137 4,802,700 479,563 90.0 1,403,255 34.2
12/31/X0 4,849,798 5,236,922 387,124 92.6 1,462,965 26.5
12/31/X1 5,269,502 5,709,764 440,262 92.3 1,546,650 28.5
MEPP
12/31/W6 $ 301,305 $ 342,842 $ 41,537 87.9% $ 163,508 25.4%
12/31/W7 362,366 378,885 16,519 95.6 173,476 9.5
12/31/W8 407,117 434,949 27,832 93.6 182,258 15.3
12/31/W9* 450,975 470,512 19,537 95.8 190,272 10.3
12/31/X0 505,714 513,044 7,330 98.6 198,368 3.7
12/31/X1 549,696 559,367 9,671 98.3 209,715 4.6
*Revised economic and noneconomic assumptions due to experience review.
In this illustration, the plans use the entry age actuarial cost method for purposes of calculating
the ARC of the employers. However, if the ARCs were calculated using the aggregate
actuarial cost method, the plans would be required by paragraph 6 of this Statement to present
information in the schedule of funding progress calculated using the entry age actuarial cost
method as a surrogate, to disclose that fact, and to disclose that the purpose of the presentation
is to provide information that serves as a surrogate for the funding progress of the plans.
41
REQUIRED SUPPLEMENTARY INFORMATION (cont.)
SCHEDULES OF EMPLOYER CONTRIBUTIONS
(Dollar amounts in thousands)
Employer Contributions
SEPP SDEPP MEPP
Year Annual Annual Annual
Ended Required Percentage Required Percentage Required Percentage
12/31 Contribution Contributed Contribution Contributed Contribution Contributed
20W7 $100,729 100% $115,935 100% $15,042 100%
20W8 106,030 100 122,682 100 15,959 100
20W9 112,798 100 129,822 100 16,768 100
20X0 118,735 100 137,378 100 17,505 100
20X1 124,276 100 142,347 100 18,049 100
20X2 137,916 100 157,783 100 18,653 100
42
Illustration 3—Notes to the Financial Statements for a Defined Contribution Pension
Plan
This illustration updates Illustration 3 of paragraph 154 of Statement 25 for the effects of
this Statement and includes a notation related to the requirements of this Statement.
City of CW Notes to the Financial Statements
for the Year Ended December 31, 20X2
A. Plan Description
The CW Retirement Plan (CWRP) is a defined contribution pension plan established
by the city of CW to provide benefits at retirement to general and public safety employees of
the city. At December 31, 20X2, there were 429 plan members. Plan members are required
to contribute 6 percent of covered salary. The city is required to contribute 9 percent of
annual covered payroll. Plan provisions and contribution requirements are established and
may be amended by the CW City Council.
B. Significant Accounting Policies
Basis of Accounting. CWRP financial statements are prepared using the accrual basis
of accounting. Employer and plan member contributions are recognized in the period that
the contributions are due.
Method Used to Value Investments. Plan investments are reported at fair value. Short-
term investments are reported at cost, which approximates fair value. Fair value of other
securities is determined by the mean of the most recent bid and asked prices as obtained
from dealers that make markets in such securities. Investments for which market quotations
are not readily available are valued at their fair values as determined by the custodian under
the direction of the CWRP Board of Trustees, with the assistance of a valuation service.
Paragraph 5 of
this Statement
requires that
defined
contribution
plans disclose
the methods
and significant
assumptions
used to
estimate the
fair value of
investments, if
that fair value
is based on
other than
quoted market
prices.
43
Illustration 4—Notes to the Financial Statements for an Employer Contributing to a
Single-Employer Defined Benefit Pension Plan
This illustration updates Illustration 2 of paragraph 198 of Statement 27 for certain effects
of this Statement and includes notations related to the requirements of this Statement. The
employer in this illustration participates in the retirement system for which note disclosures
and RSI are presented in Illustration 2. Note that this example assumes that the plan is
included as a pension trust fund in the employer’s financial reporting entity. Therefore, the
requirement of paragraph 22 of Statement 27 and paragraph 9 of Statement 50 to present a
schedule of funding progress covering at least three actuarial valuations would be met by
complying with paragraphs 33–40 of Statement 25 and paragraph 6 of Statement 50 for the
pension trust fund. That schedule is not included in this illustration. Information required by
Statement 25, as amended, would be shown in addition to the information illustrated below
because the plan is reported as a pension trust fund. If the plan was not included in the
employer’s financial reporting entity, the employer would be required to present a schedule
of funding progress similar to those included in Illustrations 6 and 7 of this appendix.
State of Kremer Notes to the Financial Statements
for the Year Ended December 31, 20X2
Note X. Pension Plan
Plan Description. State Employees Pension Plan (SEPP) is a single-employer defined
benefit pension plan administered by the Kremer Retirement System (KRS). SEPP provides
retirement, disability, and death benefits to plan members and beneficiaries. Cost-of-living
adjustments are provided to members and beneficiaries at the discretion of the state
legislature. Article 29 of the Regulations of the state of Kremer assigns the authority to
establish and amend benefit provisions to the state legislature. KRS issues a publicly
available financial report that includes financial statements and required supplementary
information (RSI) for SEPP. That report may be obtained by writing to KRS, State
Government Lane, Anytown, USA 01000 or by calling (000) 000-PLAN.
Funding Policy. The contribution requirements of plan members and the state are
established and may be amended by the state legislature. Plan members are required to
contribute 7.8 percent of their annual covered salary. The state is required to contribute at
an actuarially determined rate; the current rate is 11.9 percent of annual covered payroll.
Article 29(d) states that the state’s contribution rate may not exceed 14 percent of payroll.
Paragraph 7a
of this
Statement
requires
employers to
disclose legal
or contractual
maximum
contribution
rates, if
applicable.
44
Annual Pension Cost and Net Pension Obligation. The state’s annual pension cost and
net pension obligation to SEPP for the current year were as follows:
(Dollar amounts in thousands)
Annual required contribution (ARC) $ 137,916
Interest on net pension obligation 2,867
Adjustment to ARC (2,089)
Annual pension cost 138,694
Contributions made (137,916)
Increase (decrease) in net pension obligation 778
Net pension obligation beginning of year 38,221
Net pension obligation end of year $ 38,999
Three-Year Trend Information
(Dollar amounts in thousands)
Fiscal Annual Percentage Net
Year Pension of APC Pension
Ending Cost (APC) Contributed Obligation
12/31/X0 $119,757 99.1% $37,458
12/31/X1 125,039 99.4 38,221
12/31/X2 138,694 99.4 38,999
Funded Status and Funding Progress. As of December 31, 20X1, the most recent
actuarial valuation date, the plan was 85.4 percent funded. The actuarial accrued liability for
benefits was $4.3 billion, and the actuarial value of assets was $3.7 billion, resulting in an
unfunded actuarial accrued liability (UAAL) of $0.6 billion. The covered payroll (annual
payroll of active employees covered by the plan) was $1.2 billion, and the ratio of the
UAAL to the covered payroll was 54.2 percent.
The schedule of funding progress, presented as RSI following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan
assets are increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
Paragraph
8b(1) of this
Statement
requires that
the plan
include
disclosure
indicating that
multiyear
funding
progress
information is
presented as
RSI.
45
Actuarial Methods and Assumptions. In the December 31, 20X1, actuarial valuation,
the entry age actuarial cost method was used. The actuarial assumptions included (a) 7.5
percent investment rate of return (net of administrative expenses) and (b) projected salary
increases ranging from 5.5 to 9.5 percent per year. Both (a) and (b) included an inflation
component of 5.5 percent. The assumptions did not include postretirement benefit increases,
which are funded by state appropriation when granted. The projection of benefits for
financial accounting purposes also does not explicitly incorporate the potential effects of the
14 percent limitation on the state’s contribution rate disclosed above under ―Funding
Policy.‖ The actuarial value of assets was determined using techniques that spread the
effects of short-term volatility in the market value of investments over a four-year period.
The UAAL is being amortized as a level percentage of projected payroll on an open basis.
The remaining amortization period at December 31, 20X1, was 23 years.
Because the employer has a legal funding limit for
this plan, paragraph 8b(2) of this Statement requires
disclosure that the actuarial valuation does not
explicitly consider the effects of the limitation in the
projection of benefits.
In this
illustration,
year-based
rates were not
used.
However, if
the economic
assumptions
had
contemplated
different rates
for successive
years, the plan
would be
required by
paragraph
8b(3)(a) of
this Statement
to disclose the
initial and
ultimate rates.
In this illustration, the ARC is determined using the entry age actuarial cost method.
However, if the ARC was calculated using the aggregate actuarial cost method, the
employer would be required by paragraph 8a of this Statement to present funded
status information using the entry age actuarial cost method. In that circumstance,
paragraph 8b(3)(b) of this Statement also would require disclosure that because the
aggregate actuarial cost method does not identify or separately amortize unfunded
actuarial liabilities, information about funded status and funding progress has been
prepared using the entry age actuarial cost method for that purpose, and that the
information presented is intended to serve as a surrogate for the funded status and
funding progress of the plan.
Paragraph 8b of this Statement requires disclosure of information about actuarial
methods and assumptions used in determining the ARC, annual pension cost, and
funded status and funding progress information.
46
Illustration 5—Notes to the Financial Statements for an Employer Contributing to a
Cost-Sharing Multiple-Employer Defined Benefit Pension Plan
This illustration updates Illustration 3 of paragraph 198 of Statement 27 and includes
notations related to the requirements of this Statement. Note that the cost-sharing pension
plan in which this illustrative employer participates (the plan for which note disclosures and
RSI are presented in Illustration 2) is included in the publicly available financial report of
the public employee retirement system (PERS), prepared in accordance with the
requirements of Statement 25, as amended. If, however, the cost-sharing plan was not
included in the financial report of a PERS or another entity and did not issue a publicly
available stand-alone financial report, paragraph 10 of this Statement would require that
the cost-sharing employer present as RSI schedules of funding progress and employer
contributions for the plan (and notes to these schedules) prepared in accordance with
Statement 25, as amended. Those schedules are included in Illustration 2 of this appendix.
In that circumstance, paragraph 10 also would require that the employer disclose that the
information presented relates to the plan as a whole, of which the employer is one
participating employer, and should provide information helpful for understanding the scale
of the information presented relative to the employer. Additionally, in this illustration, there
are no legal or contractual maximum contribution rates.
47
Poison Ivy School District Notes to the Financial Statements
for the Year Ended December 31, 20X2
Note X. Pension Plan
Plan Description. The Poison Ivy School District contributes to the School District
Employees Pension Plan (SDEPP), a cost-sharing multiple-employer defined benefit
pension plan administered by the Kremer Retirement System (KRS). SDEPP provides
retirement and disability benefits, annual cost-of-living adjustments, and death benefits to
plan members and beneficiaries. Article 30 of the Regulations of the state of Kremer assigns
the authority to establish and amend benefit provisions to the SDEPP Board of Trustees.
KRS issues a publicly available financial report that includes financial statements and
required supplementary information for SDEPP. That report may be obtained by writing to
KRS, State Government Lane, Anytown, USA 01000 or by calling (000) 000-PLAN.
Funding Policy. Plan members are required to contribute 7.6 percent of their annual
covered salary, and Poison Ivy School District is required to contribute at an actuarially
determined rate. The current rate is 10.5 percent of annual covered payroll. The
contribution requirements of plan members and Poison Ivy School District are established
and may be amended by the SDEPP Board of Trustees. The School District’s contributions
to SDEPP for the years ending December 31, 20X2, 20X1, and 20X0, were $7,619, $6,926,
and $6,596, respectively, equal to the required contributions for each year.
Paragraph 7b of
this Statement
requires that
cost-sharing
employers
describe in notes
to the financial
statements how
the required
contribution rate
is determined or
that the plan is
financed on a
pay-as-you-go
basis.
48
Illustration 6—Notes to the Financial Statements for an Employer Contributing to an
Agent Multiple-Employer Defined Benefit Pension Plan
This illustration updates Illustration 4 of paragraph 198 of Statement 27 for certain effects
of this Statement and includes notations related to the requirements of this Statement. The
employer in this illustration participates in the retirement system for which note disclosures
and RSI are presented in Illustration 2. Note that in this illustration, there are no legal or
contractual maximum contribution rates.
City of Dill Notes to the Financial Statements
for the Year Ended December 31, 20X2
Note X. Pension Plan
Plan Description. The city’s defined benefit pension plan, Dill Employees Pension
Plan (DEPP), provides retirement and disability benefits, annual cost-of-living adjustments
(COLAs), and death benefits to plan members and beneficiaries. DEPP is affiliated with the
Municipal Employees Pension Plan (MEPP), an agent multiple-employer pension plan
administered by the Kremer Retirement System (KRS). Article 39 of the Regulations of the
state of Kremer assigns the authority to establish and amend the benefit provisions of the
plans that participate in MEPP to the respective employer entities; for DEPP, that authority
rests with the city of Dill. KRS issues a publicly available financial report that includes
financial statements and required supplementary information (RSI) for MEPP. That report
may be obtained by writing to KRS, State Government Lane, Anytown, USA 01000 or by
calling (000) 000-PLAN.
Funding Policy. DEPP members are required to contribute 8 percent of their annual
covered salary. The city is required to contribute at an actuarially determined rate; the
current rate is 11 percent of annual covered payroll. The contribution requirements of plan
members and the city are established and may be amended by the MEPP Board of Trustees.
Annual Pension Cost. For 20X2, the city’s annual pension cost of $2,590,000 for
DEPP was equal to the city’s required and actual contributions.
49
Three-Year Trend Information for DEPP
(Dollar amounts in thousands)
Fiscal Annual Percentage Net
Year Pension of APC Pension
Ending Cost (APC) Contributed Obligation
12/31/X0 $2,409 100% $0
12/31/X1 2,511 100 0
12/31/X2 2,590 100 0
12/31/X1 2,511 100 0
12/31/X2 2,590 100 0
The required contribution was determined as part of the December 31, 20X1, actuarial
valuation using the entry age actuarial cost method. The actuarial assumptions at
December 31, 20X1, included (a) 7.5 percent investment rate of return (net of administrative
expenses), (b) projected salary increases ranging from 5.5 to 11.5 percent per year, and (c)
2 percent per year COLAs. Both (a) and (b) included an inflation component of 5.5 percent.
The actuarial value of DEPP assets was determined using techniques that spread the effects
of short-term volatility in the market value of investments over a four-year period. DEPP’s
unfunded actuarial accrued liability is being amortized as a level percentage of projected
payroll on a closed basis. The remaining amortization period at December 31, 20X1, was 14
years.
Paragraph 8b
of this
Statement
requires
disclosure of
information
about
actuarial
methods and
assumptions
used in
determining
the annual
required
contribution
of the
employer
(ARC),
annual
pension cost,
and funded
status and
funding
progress
information.
In this illustration, year-based rates were not used. However, if the economic assumptions had
contemplated different rates for successive years, the plan would be required by paragraph
8b(3)(a) of this Statement to disclose the initial and ultimate rates.
50
Funded Status and Funding Progress. As of December 31, 20X1, the most recent
actuarial valuation date, the plan was 94.3 percent funded. The actuarial accrued liability for
benefits was $59.3 million, and the actuarial value of assets was $62.8 million, resulting in
an unfunded actuarial accrued liability (UAAL) of $3.5 million. The covered payroll (annual
payroll of active employees covered by the plan) was $23.5 million, and the ratio of the
UAAL to the covered payroll was 15.1 percent.
The schedule of funding progress, presented as RSI following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan
assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
Paragraph 8a of this Statement requires that the illustrated funded status
information be disclosed as of the most recent actuarial valuation date.
In this illustration, the ARC is determined using the entry age actuarial cost
method. However, if the ARC was calculated using the aggregate actuarial cost
method, the employer would be required by paragraph 8a of this Statement to
present funded status information using the entry age actuarial cost method. In
that circumstance, paragraph 8b(3)(b) of this Statement also would require
disclosure that because the aggregate actuarial cost method does not identify or
separately amortize unfunded actuarial liabilities, information about funded status
and funding progress has been prepared using the entry age actuarial cost method
for that purpose, and that the information presented is intended to serve as a
surrogate for the funded status and funding progress of the plan.
Paragraph
8b(1) of this
Statement
requires that
the plan
include
disclosure
indicating that
multiyear
funding
progress
information is
presented as
RSI.
51
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Funding Progress for DEPP
(Dollar amounts in thousands)
Actuarial UAAL as
Actuarial Accrued Unfunded a Percentage
Actuarial Value of Liability (AAL) AAL Funded Covered of Covered
Valuation Assets —Entry Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b – a) (a / b) (c) ((b – a) / c)
12/31/W9* $49,629 $52,838 $3,209 93.9% $21,367 15.0%
12/31/X0 55,088 57,615 2,527 95.6 22,276 11.3
12/31/X1 59,262 62,817 3,555 94.3 23,551 15.1
*Revised economic and noneconomic assumptions due to experience review.
In this illustration, the entry age actuarial cost method is used to calculate the ARC. However, if the ARC
was calculated using the aggregate actuarial cost method, paragraph 9 of this Statement would require the
employer to present information in the schedule of funding progress calculated using the entry age actuarial
cost method as a surrogate, to disclose that fact, and to disclose that the purpose of the presentation is to
provide information that serves as a surrogate for the funding progress of the plan.
52
Illustration 7—Notes to the Financial Statements for an Employer with Three Single-
Employer Defined Benefit Pension Plans
This illustration updates Illustration 5 of paragraph 198 of Statement 27 for certain effects
of this Statement and includes notations related to the requirements of this Statement. It
shows one way an employer with several plans can combine disclosures so that the required
information is presented for each plan without unnecessary duplication. The Illustration
assumes that each plan issues a stand-alone report that complies with Statement 25, as
amended. However, the plans are not included in the employer’s financial reporting entity.
Therefore, the employer is required to present a schedule of funding progress for each plan,
in accordance with paragraph 22 of Statement 27 and paragraph 9 of Statement 50.
City of Barbet Notes to the Financial Statements
for the Year Ended December 31, 20X2
Note X. Pension Plans
Plan Descriptions. The City of Barbet contributes to three single-employer defined
benefit pension plans: Employees Retirement Plan, Fire and Police Retirement Plan, and
Elected Officials Retirement Plan. Each plan provides retirement, disability, and death
benefits, and annual cost-of-living adjustments (COLAs) to plan members and beneficiaries.
Article 37 of the Barbet City Code assigns the authority to establish and amend benefit
provisions to the Board of Trustees of each retirement plan. Each plan issues a publicly
available financial report that includes financial statements and required supplementary
information (RSI) for that plan. Those reports may be obtained by writing or calling the
plan.
53
Employees Fire and Police Elected Officials
Retirement Plan Retirement Plan Retirement Plan
101 Municipal Lane 105 Municipal Lane 108 Municipal Lane
Barbet, XX 12345 Barbet, XX 12345 Barbet, XX 12345
(999) 999-9999 (999) 999-9998 (999) 999-9997
Funding Policy and Annual Pension Cost. The Board of Trustees of each plan
establishes and may amend the contribution requirements of plan members and the city.
The city’s annual pension cost for the current year and related information for each plan is
as follows: Employees Fire and Police Elected Officials
Retirement Plan Retirement Plan Retirement Plan
Contribution rates:
City 4.6% 25.1% 28.3%
Plan members 5.0% 7.0% 5.8%
Annual pension cost (thousands) $11,778 $38,626 $195
Contributions made (thousands) $11,778 $38,626 $195
Actuarial methods and assumptions. The following is information as of the most recent
actuarial valuation:
In this illustration, the employer does not have a legal or contractual funding limit for any
of the plans. If the employer had such a limitation, paragraph 7a of this Statement would
require disclosure of the limitation, and paragraph 8b(2) would require disclosure that the
actuarial valuation does not explicitly consider the effects of the limitation in the
projection of benefits.
54
Employees Fire and Police Elected Officials
Retirement Plan Retirement Plan Retirement Plan
Actuarial valuation date 1/1/X2 1/1/X2 1/1/X2
Actuarial cost method Entry age Aggregate* Attained age
Amortization method Level n/a* Level
percentage percentage
of pay, open of pay, closed
Remaining amortization period 20 years n/a* 8 years
Asset valuation method 5-year 5-year 5-year
smoothed smoothed smoothed
market market market
Actuarial assumptions:
Investment rate of return† 8.5% 8.5% 7.5%
Projected salary increases† 6.2–8.0% 5.7–10.3% 6% every 4 years
COLAs 1.25% per year 1.25% per year 6% every 4 years
_________________________
*The aggregate actuarial cost method is used to determine the annual required contribution of the employer
(ARC) for the Fire and Police Retirement Plan. Because the method does not identify or separately amortize
unfunded actuarial liabilities, information about funded status is prepared using the entry age actuarial cost
method and is intended to serve as a surrogate for the funded status of the plan.
†Includes inflation assumption of 4%.
Paragraph 8a of this Statement requires disclosure of information about the funded status of the
plan as of the most recent valuation date in notes to the financial statements. If the aggregate
actuarial cost method is used to determine the ARC, funded status and funding progress
information is required to be prepared using the entry age method, and paragraph 8b(3)(b) of this
Statement requires the additional disclosure illustrated here. (The cost method used by the Fire and
Police Retirement Plan in this illustration has been changed from that originally illustrated in
Statement 27 in order to illustrate information required by this Statement when the aggregate
actuarial cost method is used.)
In this
illustration,
year-based
rates were not
used.
However, if
the economic
assumptions
had
contemplated
different rates
for successive
years, the
plan would be
required by
paragraph
8b(3)(a) of
this
Statement to
disclose the
initial and
ultimate rates.
55
Three-Year Trend Information
(Dollar amounts in thousands)
Annual Percentage Net
Year Pension of APC Pension
Ending Cost (APC) Contributed Obligation
Employees Retirement Plan
12/31/X0 $10,247 100% $0
12/31/X1 13,944 100 0
12/31/X2 11,778 100 0
Fire and Police Retirement Plan
12/31/X0 $37,015 100% $0
12/31/X1 39,501 100 0
12/31/X2 38,626 100 0
Elected Officials Retirement Plan
12/31/X0 $255 100% $0
12/31/X1 165 100 0
12/31/X2 195 100 0
Funded Status and Funding Progress. The following is funded status information for
each plan as of 1/1/X2, the most recent actuarial valuation date:
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability
(AAL)
—Entry Age
(b)†
Unfunded
AAL
(Excess of
Assets over
AAL)
(b – a)
Funded
Ratio
(a / b)
Covered
Payroll
(c)
UAAL
(Excess of
Assets over
AAL) as a
Percentage
of Covered
Payroll
((b – a) / c)
Employees
Retirement Plan
$693,241
$676,442
$(16,799)
102.5%
$298,770
(5.6)%
Fire and Police
Retirement Plan
1,160,880
1,205,406
44,526
96.3
153,989
28.9
Elected Officials
Retirement Plan
4,023
4,075
52
98.7
690
7.5
†For purposes of this schedule, the AAL for each plan is determined using the entry age actuarial cost method.
Note that for the Fire and Police Retirement Plan, the ARC is calculated using the aggregate actuarial cost
method.
The aggregate actuarial cost method is used to calculate the ARC for the Fire and Police Retirement Plan. In
this circumstance, paragraph 8a of this Statement requires the employer to present funded status information
calculated using the entry age actuarial cost method as a surrogate.
56
The schedule of funding progress, presented as RSI following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan
assets is increasing or decreasing over time relative to the AAL for benefits.
Paragraph
8b(1) of this
Statement
requires that
the plan
include
disclosure
indicating that
multiyear
funding
progress
information is
presented as
RSI.
57
REQUIRED SUPPLEMENTARY INFORMATION
Schedules of Funding Progress
(Dollar amounts in thousands)
Employees Retirement Plan Excess of Assets
Actuarial over AAL as
Actuarial Accrued Excess of a Percentage
Actuarial Value of Liability (AAL) Assets over Funded Covered of Covered
Valuation Assets —Entry Age AAL Ratio Payroll Payroll
Date (a) (b) (a – b) (a / b) (c) ((a – b) / c)
1/1/X0 $621,334 $591,196 $30,138 105.1% $299,438 10.1%
1/1/X1 651,223 602,472 48,751 108.1 301,872 16.1
1/1/X2 693,241 676,442 16,799 102.5 298,770 5.6
Fire and Police Retirement Plan UAAL as
Actuarial Unfunded a Percentage
Actuarial Value of AAL AAL Funded Covered of Covered
Valuation Assets —Entry Age† (UAAL) Ratio Payroll Payroll
Date (a) (b) (b – a) (a / b) (c) ((b – a) / c)
1/1/X0 $ 993,044 $1,059,517 $66,473 93.7% $147,593 45.0%
1/1/X1 1,065,786 1,140,059 74,273 93.5 157,471 47.2
1/1/X2* 1,160,880 1,205,406 44,526 96.3 153,989 28.9
Elected Officials Retirement Plan UAAL as
Actuarial a Percentage
Actuarial Value of AAL Funded Covered of Covered
Valuation Assets —Entry Age UAAL Ratio Payroll Payroll
Date (a) (b) (b – a) (a / b) (c) ((b – a) / c)
1/1/X0* $3,216 $3,803 $ 587 84.6% $495 118.6%
1/1/X1* 3,531 4,682 1,151 75.4 495 232.5
1/1/X2‡ 4,023 4,075 52 98.7 690 7.5
*Revised economic assumptions and changes in plan benefit provisions.
†The ARC is calculated using the aggregate actuarial cost method. Information in this schedule is calculated
using the entry age actuarial cost method as a surrogate for the funding progress of the plan.
‡Revised economic assumptions.
The aggregate actuarial cost method is used to calculate the ARC for the Fire and Police Retirement Plan. In
this circumstance, paragraph 9 of this Statement requires the employer to present information in the
schedule of funding progress calculated using the entry age actuarial cost method, to disclose that fact, and
to disclose that the purpose of the presentation is to provide information that serves as a surrogate for the
funding progress of the plan.
58
Appendix D
CODIFICATION INSTRUCTIONS
60. The sections that follow update the June 30, 2006, Codification of Governmental
Accounting and Financial Reporting Standards for the effects of this Statement. Only the
paragraph number of the Statement is listed if the paragraph will be cited in full in the
Codification.
* * *
PENSION ACTIVITIES—EMPLOYER REPORTING SECTION P20
Sources: [Add GASB Statement 50.]
.101 [Update cross-references in footnote 1.]
.107 [Revise the last sentence of footnote 12 as follows:] Separate determination and
amortization of the unfunded actuarial liability are not part of the aggregate actuarial cost
method and are not required when that method is used; however, the disclosure
requirements of paragraphs .118c, .118d(3)(d), and .119 are applicable when that method
is used. [GASBS 27, fn10, as amended by GASBS 50, ¶8 and ¶9]
.108 [Update cross-references.]
.117 [Revise subparagraph b.3 as follows:] Required contribution rate(s) of the employer
in accordance with the funding policy, in dollars or as a percentage of current-year
covered payroll, and, if applicable, legal or contractual maximum contribution rates. If
the plan is a single-employer or agent plan and the rate differs significantly from the
ARC, disclose how the rate is determined (for example, by statute or contract, or that the
59
plan is financed on a pay-as-you-go basis). If the plan is a cost-sharing plan, disclose the
required contributions in dollars, the percentage of that amount contributed for the
current year and each of the two preceding years, and how the required contribution rate
is determined (for example, by statute or by contract, or on an actuarially determined
basis) or that the plan is financed on a pay-as-you-go basis.
[Add GASBS 50, ¶7, to sources.]
.118 [Insert new subparagraph c, including footnotes, as follows; renumber subsequent
subparagraph and footnotes.]
c. Information about the funded status of the plan as of the most recent valuation date,
including the actuarial valuation date, the actuarial value of assets, the actuarial
accrued liability, the total unfunded actuarial liability (or funding excess), the
actuarial value of assets as a percentage of the actuarial accrued liability (funded
ratio), the annual covered payroll, and the ratio of the unfunded actuarial liability
(or funding excess) to annual covered payroll.18
Employers that use the aggregate
actuarial cost method should prepare this information using the entry age actuarial
cost method for that purpose only.19
[Revise current subparagraph c as follows:]
d. Information about actuarial methods and assumptions used in valuations on which
reported information about the ARC, annual pension cost, and the funded status and
funding progress of pension plans is based, including the following:
1. Disclosure that the required schedule of funding progress immediately
following the notes to the financial statements presents multiyear trend
information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits.20
2. Disclosure that the projection of benefits for financial reporting purposes does
not explicitly incorporate the potential effects of legal or contractual funding
limitations (as discussed in the disclosure of funding policy in paragraph
.117b(3)), if applicable.21
3. Identification of the actuarial methods and significant assumptions used to
determine the ARC for the current year and the information required by
paragraph .118c. The disclosures should include:
(a) The actuarial cost method.
(b) The method(s) used to determine the actuarial value of assets.
60
(c) The assumptions with respect to the inflation rate, investment return,
projected salary increases, and postretirement benefit increases. If the
economic assumptions contemplate different rates for successive years
(year-based or select and ultimate rates), the rates that should be
disclosed are the initial and ultimate rates.
(d) The amortization method (level dollar or level percentage of projected
payroll) and the amortization period (equivalent single amortization
period, for plans that use multiple periods) for the most recent actuarial
valuation and whether the period is closed or open. If the aggregate
actuarial cost method is used, disclose that because the method does not
identify or separately amortize unfunded actuarial liabilities, information
about funded status and funding progress has been prepared using the
entry age actuarial cost method for that purpose and that the information
presented is intended to serve as a surrogate for the funded status and
funding progress of the plan.
[Add GASBS 50, ¶8, to sources.]
18[GASBS 50, fn3] [Update cross-reference.]
19[GASBS 27, fn17, as amended by GASBS 50, ¶8; GASBS 50, fn4] [Change Statement to section and
update cross-references.] 20
The required reference to the schedule of funding progress presented as RSI is not intended to represent
or imply incorporation of the schedule of funding progress into notes to the basic financial statements.
[GASBS 50, fn5] 21
[GASBS 50, fn6]
.119 [Revise as follows:] Sole and agent employers should present the following
information for the most recent actuarial valuation and the two preceding valuations:
a. Information about the funding progress of the plan, including, for each valuation,
each of the elements of information listed in paragraph .118c.
b. Factors that significantly affect the identification of trends in the amounts reported,
including, for example, changes in benefit provisions, the size or composition of the
population covered by the plan, or the actuarial methods and assumptions used.
(The amounts reported for prior years should not be restated.)22
The information should be calculated in accordance with the parameters and should be
presented as required supplementary information. (Until three actuarial valuations have
been performed in accordance with the parameters, the required information should be
presented for as many years as it is available.) Employers that use the aggregate actuarial
61
cost method to determine the ARC should prepare the funding progress information using
the entry age actuarial cost method and should disclose that fact and that the purpose of
this disclosure is to provide information that serves as a surrogate for the funding
progress of the plan.23
[GASBS 27, ¶22; GASBS 50, ¶9]
22[Insert current footnote 18.]
23[GASBS 50, fn7] [Update cross-reference.]
[Insert new paragraph .120 as follows; renumber subsequent paragraphs.]
.120 [GASBS 50, ¶10] [Update cross-references.]
.127 [Update cross-references in current footnote 22.]
.128 [Update cross-references in current paragraph .127.]
* * *
PENSION PLANS—DEFINED BENEFIT SECTION Pe5
Sources: [Add GASB Statement 50.]
.119 [Delete the second sentence.] [GASBS 25, ¶27, as amended by GASBS 34, ¶13,
and GASBS 50, fn2]
.124 [In the last sentence, replace reference to subparagraph d with reference to
subparagraph e. Revise subparagraphs as follows:]
[Revise subparagraph b.2 as follows:] Brief description of how the fair value of
investments is determined, including the methods and significant assumptions used to
62
estimate the fair value of investments, if that fair value is based on other than quoted
market prices.
[Add the following to the end of subparagraph c.2:] Legal or contractual maximum
contribution rates should be disclosed, if applicable.
[Insert new subparagraph d, including footnotes, as follows; renumber subsequent
subparagraph and footnotes.]
d. Funded status and funding progress
1. Information about the funded status of the plan as of the most recent valuation
date, including the actuarial valuation date, the actuarial value of assets, the
actuarial accrued liability, the total unfunded actuarial accrued liability, the
actuarial value of assets as a percentage of the actuarial accrued liability
(funded ratio), the annual covered payroll, and the ratio of the unfunded
actuarial liability to annual covered payroll.15
The information should be
calculated in accordance with the parameters set forth in paragraphs .127 and
.128 of this section. Plans that use the aggregate actuarial cost method to
calculate the ARC should prepare funded status information using the entry
age actuarial cost method.
2. Information about actuarial methods and assumptions used in valuations on
which reported information about the ARC and the funded status and funding
progress of pension plans are based, including the following:
(a) Disclosure that the required schedule of funding progress immediately
following the notes to the financial statements presents multiyear trend
information about whether the actuarial value of plan assets is increasing
or decreasing over time relative to the actuarial accrued liability for
benefits.16
(b) Disclosure that the projection of benefits for financial reporting purposes
does not explicitly incorporate the potential effects of legal or
contractual funding limitations.
(c) Identification of the actuarial methods and significant assumptions used
to determine the ARC for the current year and the information required
by paragraph .124d(1) of this section. The disclosures should include:
(i) The actuarial cost method.
(ii) The method(s) used to determine the actuarial value of assets.
(iii) The assumptions with respect to the inflation rate, investment
return (discount rate), projected salary increases, and
postretirement benefits increases. If the economic assumptions
contemplate different rates for successive years (year-based or
63
select and ultimate rates), the rates that should be disclosed are
the initial and ultimate rates.
(iv) The amortization method (level dollar or level percentage of
projected payroll) and the amortization period (equivalent single
amortization period, for plans that use multiple periods) for the
most recent actuarial valuation and whether the period is closed or
open. Plans that use the aggregate actuarial cost method should
disclose that because the method does not identify or separately
amortize unfunded actuarial accrued liabilities, information
about the plan’s funded status and funding progress has been
prepared using the entry age actuarial cost method for that purpose
and that the information presented is intended to serve as a
surrogate for the funded status and funding progress of the plan.
[Add GASBS 50, ¶4, to sources.]
15
[GASBS 50, fn1] [Update cross-references.] 16
[GASBS 50, fn2]
.125 [Delete current footnotes 16 and 17; renumber subsequent footnotes.]
.128 [Revise subparagraphs as follows:]
c. [Remove bold from all terms.]
d. [Remove bold from actuarial cost method; bold aggregate in the first sentence.
Add the following to the end of the subparagraph:] A plan that uses the aggregate
actuarial cost method should prepare a schedule of funding progress following the
requirements of paragraph .129 using the entry age actuarial cost method for that
purpose and should follow the related disclosure requirements of that paragraph.
e. [Update cross-reference in current footnote 22.]
f. [Remove bold from unfunded actuarial accrued liability, equivalent single
amortization period in subparagraph 1, and level dollar and level percentage of the
project payroll in subparagraph 3; revise last sentence of current footnote 23 as
follows:] Separate determination and amortization of the unfunded actuarial
liability are not part of the aggregate actuarial cost method and are not required
when that method is used, with regard to computation of the ARC; however, the
disclosure requirements of paragraphs .124d(1), .124d(2)(c)(iv), and .129 are
applicable when that method is used. [GASBS 25, fn24, as amended by GASBS 50,
¶4 and ¶6]
[Add GASBS 50, ¶4, to sources.]
64
.129 [Revise as follows:] The schedule of funding progress should present information
about the funding progress of each plan, including each of the elements of information
listed in paragraph .124d(1) for each of the past six consecutive years of the plan, at a
minimum. All actuarially determined information reported should be calculated in
accordance with the parameters and should be presented as of the actuarial valuation
date.24
Plans that use the aggregate actuarial cost method should prepare the information
using the entry age actuarial cost method and should disclose that fact and that the
purpose of this disclosure is to provide information that serves as a surrogate for the
funding progress of the plan. [GASBS 25, ¶37; GASBS 50, ¶6]
24
[Insert current footnote 25.]
.132 [Revise as follows:] The schedules of required supplementary information should
be accompanied by disclosure of factors that significantly affect the identification of
trends in the amounts reported in the required schedules, including, for example, changes
in benefit provisions, the size or composition of the population covered by the plan, or
the actuarial methods and assumptions used. (The amounts reported for prior years
should not be restated.)27
[GASBS 25, ¶40, as amended by GASBS 50, ¶2]
27[Insert current footnote 28.]
* * *
65
PENSION AND OTHER POSTEMPLOYMENT SECTION Pe6
BENEFIT PLANS—DEFINED CONTRIBUTION
Sources: [Add GASB Statement 50.]
.104 [Revise subparagraph b as follows:] Summary of significant accounting policies—
Basis of accounting, fair value of plan assets (unless plan assets are reported at fair
value), and a brief description of how the fair value is determined, including the methods
and significant assumptions used to estimate the fair value of investments, if that fair
value is based on other than quoted market prices.
[Add GASBS 50, ¶5, to sources.]