public employees retirement association of minnesota an overview of gasb 68 for cost-sharing plans...

Public Employees Retirement Association of Minnesota

An Overview of GASB 68 for Cost-Sharing Plans

Dave DeJonge

Assistant Executive Director, PERA


Effective Date:

Fiscal years beginning after June 15, 2014

6/30/15 or 12/31/15


AgendaBackground

Net Pension Liability

Pension Expense

Deferred Inflows/Outflows of Resources

Footnote Disclosures

RSI Schedules


Background

Current Standards:

GASB Statements 25 & 27

Pension costs are directly related to funding.


Pensions are part of an employee/employer exchange

A pension is the deferred piece of total compensation

Employers incur pension obligations as a result of the “employment exchange”

Pension expense should berecognized in the period servicesare provided, not when they are paid

Fundamental New Approach by GASB


Fundamental New Approach by GASBEmployers are primarily responsible for the unfunded

pension obligation

Net Pension Liability (NPL) = Plan Assets – Plan Liabilities

Employers need to book the NPL as a liability on government-widefinancials


BackgroundEmployers include their proportional share of the

NPL and Pension Expense on the face of their government-wide financial statements.

Each employer’s proportional share will be determined based on contributions paid to PERA during the measurement period.

New extensive footnote disclosures will be required.

Two new RSI schedules will be required.


Net Pension Liability (NPL)Equal to PERA’s Total Pension Liability (TPL)

minus PERA’s Fiduciary Net Position

Measured as of June 30 annually

Proportionate share of the NPL is reported on the employer’s Statement of Net Position TPL - FNP = NPL


Net Pension Liability (NPL)The NPL will be allocated to all of PERA’s employers

and included as a liability on the government-wide financial statements.

The allocation method will be based on employer’s contributions paid to PERA in relationship to all employer contributions received.

EmployerContributions Paid to PERA

(A)

PERA’s Total ER Contrib.

(B)

Proportionate Share (%)

(A/B)

PERA’s Total NPL

(C)

Proportionate Share of NPL ($)

(A/B) x C

City A $830,387 $375,000,000 0.221% $4.5 Billion $9,945,000

City B $ 62,590 $375,000,000 0.017% $4.5 Billion $765,000


Pension Expense (PE)No longer tied to funding (contributions)

Directly tied to changes in the NPL from one year to the next

Must be calculated by PERA’s actuary

Will likely be very volatile

May be a negativeexpense (revenue)


Footnote DisclosuresGASB 27

Plan DescriptionFunding PolicyEmployer ContributionsReference to PERA’s CAFR


Footnote DisclosuresGASB 68

Separate disclosures for each planExtensive note disclosures, including:

Description of benefits (terms, policies and authority) Contribution requirements (rates, basis and authority) Actuarial assumptions and discount rate used to measure

total pension liability Changes in actuarial assumptions Investment information (asset allocation, rates of return for

each asset class)


Footnote DisclosuresGASB 68 footnote disclosures (contd.)

Employer’s share and percentage of the NPL Balances of deferred inflows and outflows NPL using discount rate of +/- one percentage point

Information required will be provided by PERA


Required Supplementary Information (RSI)

GASB 27—None required

GASB 68—2 new schedules required

Schedule of Proportionate Share of the NPL

Schedule of Employer Contributions


What Will PERA Provide?Total Pension Liability (Collective Level)

PERA’s Fiduciary Net Position

Total Net Pension Liability

Total Pension Expense/Deferred Inflows & Outflows

Proportionate Share for Each Employer

Employer Contributions (Individual and Collective)

Footnote Disclosure Information


Important NoteNew accounting numbers are unrelated to funding

Contribution rates still set in MN State Statute

Funding plan is already in place


More Information

PERA’s Websitewww.mnpera.orgEmployers tabGASB 68 Toolkit

Contact Dave DeJonge [email protected]

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