public employees retirement association of minnesota the nuts and bolts of gasb 68 implementation...

Public Employees Retirement Association of Minnesota

The Nuts and Bolts of GASB 68 Implementation

Dave DeJonge

Assistant Executive Director, PERA


AgendaGASB 68—Key Concepts

GASB 71

Audit Issues

Fire Relief Associations

2


GASB 68

Replaces GASB Statements 27 & 50

Effective for fiscal years beginning after June 15, 2014

Early implementation is discouraged!

3


Why are the Standards Changing?

GASB 27 issued in 1994GASB 34—Government-Wide Financial Statements

using Accrual Accounting

Concepts Statement No. 4—Defined “Liability”

Survey of Financial Statement Users

Transparency, Accountability, Comparability

4


Fundamental New Approach by GASB

Pension expenses tied to when the services are rendered, not when paid

Pension costs no longer tied to funding

Employers are primarily responsible forthe unfunded pension obligation

Employers need to book their proportional share of PERA’s unfunded liability as a liability on their government-wide financials

5


Total Pension Liability (TPL)Calculated annually by PERA’s actuary, similar to

actuarial accrued liability

Defined in GASB 67 as the portion of the actuarial present value of projected benefit payments that is attributed to past periods of service but reflects

Anticipated benefit increases Projected salary growth Projected future service

No anticipation for future members

Likely uses a lower discount rate

6


Pension Plan’s Fiduciary Net PositionPension plan’s net assets at fair value (GASB 63)

Calculated annually by PERA’s accounting staff

Determined using the same valuation methods used by the pension plan for purposes of preparing its statement of fiduciary net position

7


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

minus PERA’s Fiduciary Net Position (similar to unfunded actuarial accrued liability)

Measured as of June 30 annually

Proportionate share of the NPL is reported on the employer’s Statement of Net Position

Similar to Unfunded OPEBObligation (GASB 45)

TPL - FNP = NPL

8


Proportionate ShareThe NPL will be allocated to all of PERA’s employers

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

Allocation methodology should be representative of future contribution effort of the employer

GASB allows allocation to be based on past contributions

GASB does not specify who calculates the proportionate share

9


Proportionate ShareAICPA White Paper recommends having the

pension plan calculate proportionate share

PERA’s 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

10


Proportionate Share

11


Proportionate ShareSome contributions will be excluded from the allocation because they do not reflect future contribution effort.

Regular Omitted Shortages/ Contrib. Total EE Paid by GrandEmployer Contrib. Deductions AMC Accruals GASB 68 Interest Delinquency ER (OD) Total0006-00 6,111,569.65 - 340.26 1,200.00 6,113,109.91 7.80 10.00 - 6,113,127.71 0010-00 932,024.26 - - 200.00 932,224.26 - - - 932,224.26 0012-00 672,103.56 - - 175.00 672,278.56 - - - 672,278.56 0014-00 186,583.81 - - 50.00 186,633.81 - - - 186,633.81 0022-00 2,113,627.07 460.88 - 500.00 2,114,587.95 10.21 - - 2,114,598.16 0030-00 1,009,888.97 2,877.93 275.00 1,013,041.90 47.32 32.90 - 1,013,122.12

Total 373,665,000.00 300,000.00 35,000.00 1,000,000.00 375,000,000.00 60,000.00 20,000.00 30,000.00 375,110,000.00

12


Proportionate ShareSchedule of Employer Allocations

As of June 30, 2014

Unit ID Employer Name Contributions Allocation0002-00 AITKIN COUNTY 598,539.73 0.16045%0006-00 ANOKA COUNTY 6,113,109.91 1.63871%0008-01 BECKER COUNTY 814,665.35 0.21838%0010-00 BELTRAMI COUNTY 932,224.26 0.24990%0012-00 BENTON COUNTY REVENUE 672,278.56 0.18021%0014-00 BIG STONE COUNTY 186,633.81 0.05003%0016-00 BLUE EARTH COUNTY 1,333,635.98 0.35750%0018-00 BROWN COUNTY 683,226.74 0.18315%0020-00 CARLTON COUNTY 1,020,241.27 0.27349%0022-00 CARVER COUNTY 2,114,587.95 0.56685%0022-09 CARVER COUNTY HISTORICAL SOCIETY 9,978.97 0.00268%0024-00 CASS COUNTY 849,624.34 0.22776%0026-00 CHIPPEWA COUNTY 353,070.32 0.09465%0027-00 CHIPPEWA COUNTY SWCD 9,983.35 0.00268%0028-00 CHIPPEWA COUNTY HOSPITAL 980,099.65 0.26273%0030-00 CHISAGO COUNTY 1,013,041.90 0.27156%0032-00 CLAY COUNTY 1,075,596.37 0.28833%9115-00 CLAY COUNTY SWCD 17,500.39 0.00469%… … … …

375,000,000.00 100.00000%

13


Proportionate ShareUnit ID Employer Name Contributions Allocation9113-00 CHISHOLM-HIBBING AIRPORT AUTHORITY 28,944.80 0.007759%9131-00 LOWER MINNESOTA RIVER WATERSHED DISTRICT 4,358.52 0.001168%9133-00 SCHOOLCRAFT LEARNING COMMUNITY 32,262.26 0.008648%9134-00 PIONEERLAND LIBRARY SYSTEM 124,406.47 0.033349%9139-00 COTTONWOOD-JACKSON HEALTH SERVICE 36,131.76 0.009686%9140-00 DOVER-EYOTA ST CHARLES SANITARY DISTRICT 10,322.14 0.002767%9152-00 EAST CENTRAL REGIONAL DEV. COMMISSION 30,945.33 0.008295%9153-00 RIVERWAY LEARNING COMMUNITY 23,008.59 0.006168%9155-00 SOUTHWEST TRANSIT 93,145.55 0.024969%9158-00 EAST CENTRAL REGIONAL LIBRARY 103,102.87 0.027638%9164-00 RIVER RIDER TRANSIT SERVICE 28,827.42 0.007728%9165-00 EXCELSIOR FIRE DISTRICT 1,293.26 0.000347%9168-00 EAST RANGE JOINT POWERS BOARD 4,001.61 0.001073%9176-01 NATIONAL JOINT POWERS ALLIANCE 250,757.97 0.067220%9180-00 HUMAN SERVICES OF FARIBAULT & MARTIN CO 332,469.18 0.089124%9194-00 GREAT RIVER REGIONAL LIBRARY 359,649.66 0.096410%9198-00 GREENWAY JOINT RECREATION ASSOCIATION 7,360.24 0.001973%9200-00 HEADWATERS REGIONAL DEVELOPMENT COMM 37,205.57 0.009974%9207-00 RED RIVER WATERSHED MANAGEMENT 5,628.13 0.001509%9208-00 GARRISON-KATHIO SANITARY DISTRICT 2,969.34 0.000796%9212-00 PENNINGTON-RED LAKE COUNTY NURSING SERVI 36,180.41 0.009699%9218-00 MINNESOTA VALLEY EDUCATIONAL DISTRICT 42,035.45 0.011268%

14


Proprietary/Fiduciary FundsShould the NPL be allocated to other statements

prepared on an accrual basis?

No allocation requirements in GASB 68

NCGA Statement 1, paragraph 42--long-term liabilities should be reported in statement of net position (fiduciary net position) if:

Amount is material

Liability is directly related to the fund

Liability is expected to be paid from the fund

15


MEASUREMENT DATEMEASUREMENT PERIOD

16


Measurement DateDate at which PERA’s liabilities and assets are

valued to determine the Net Pension Liability (NPL)

June 30 annually

Employers choose appropriate Measurement Date for reporting purposes

Measurement date must be no earlier than the end of the employer’s prior fiscal year, consistently applied from period to period

17


Measurement PeriodPeriod of time from one measurement date to the

next, during which pension costs are calculated

PERA’s fiscal year (July 1 – June 30)

June 30, 2014June 30, 2015

June 30, 2016June 30, 2017

18


Scenario 1Reporting Date = December 31, 2015

Measurement Date = ??

December 31, 2014 June 30, 2015 December 31, 2015June 30, 2014

Measurement Date

Employer’s Fiscal Year End(Reporting Date)

Employer’s Prior Fiscal Year End

Measurement Date

19


Scenario 1Reporting Date = December 31, 2015

Measurement Date = June 30, 2015


Measurement Date



Measurement Period

Measurement Date

20


Scenario 2Reporting Date = June 30, 2015


June 30, 2014 June 30, 2015June 30, 2013

Measurement Date



Measurement Date

Measurement Date

Measurement Period

21


Annual TimelineJune 30—Fiscal year end (Measurement Date)

August—Census and asset data sent to actuary

November—Actuarial valuations finalized

December 1—PERA prepares GASB schedules

December—Auditor audits schedules

December 31—PERA publishes GASB Schedules

22


Scenario 2Reporting Date = June 30, 2015


June 30, 2014 June 30, 2015June 30, 2013

Measurement Date



Measurement Date

Measurement Date

Measurement Period

23


PENSION EXPENSE & DEFERRED AMOUNTS

24


Pension Expense GASB 27

Employer contributions made during employer’s fiscal year

Easy to calculate

Easy to audit

25


Pension Expense GASB 68

Tied to when pension liability is incurred (services are rendered), not when it is funded

Change in NPL during measurement period +/- deferrals

Calculated by PERA’s actuary

Will likely be volatile from year to year

May be a negative expense (revenue)

Can’t be calculated by employers

26


Pension Expense Expensed immediately:

Current period service cost (normal cost)

Interest on the beginning total pension liability

Impact of changes in benefit provisions/terms

Projected earnings on plan investments

Other changes in plan fiduciary net position other than employer contributions or benefit payments (e.g., employee contributions, admin costs)

27


Deferred Inflows/Outflows1. Differences between expected and actual

experience with economic & demographic factors (actuarial gains and losses during the year):

MortalityPayroll IncreasesRetirementsEmployee Turnover

28


Deferred Inflows/Outflows2. Effect of changes in assumptions about future

economic and demographic factors (usually as a result of an experience study):

Discount RateMortality TablesFuture Payroll IncreasesFuture Inflation RateRetirementsEmployee Turnover

29


Deferred Inflows/Outflows3. Differences between actual and projected earnings

on plan investments.

4. Net effect of a change in the employer’s proportional share.

30


Pension Expense Change in NPL during measurement period +/- deferrals

Source of Change in NPL Expense/Deferral

Service (Normal) Cost Immediate

Interest on the TPL Immediate

Projected Investment Earnings Immediate

Changes in Benefit Provisions Immediate

Actuarial Gains and Losses Expense over average remaining service lives of all actives and in-activesChanges in Actuarial Assumptions

Changes in Proportionate Share

Differences between Projected and Actual Investment Earnings

Expense over 5-year closed period

Other Changes in the NPL Immediate

31


Pension Expense Meas. Date

Item Total Cost Amtz. Period Expense Deferred Inflow/Outflow

6/30/15 Service (Normal) Cost $50,000 NA $50,000 $0

6/30/15 Interest on the TPL $100,000 NA $100,000 $0

6/30/15 Projected Inv. Earnings ($110,000) NA ($110,000) $0

6/30/15 Employee Contributions ($25,000) NA ($25,000) $0

6/30/15 Ben. Provision Changes $20,000 NA $20,000 $0

6/30/15 Change in Actuarial Assumptions

$18,000 9 Years $2,000 D.O. $16,000

6/30/15 Actuarial Gains/Losses $9,000 9 Years $1,000 D.O. $8,000

6/30/15 Change in Proportionate Share

($900) 9 Years ($100) D.I. ($800)

6/30/15 Difference between projected and actual investment earnings

($40,000) 5 Years ($8,000) D.I. ($32,000)

32


Schedule of Pension Amounts

COST SHARING PENSION PLANSchedule of Pension Amounts by Employer

As of and for the year ended 6/30/2015

Deferred Outflows of Resources Deferred Inflows of Resources

Employer

Net Pension Liability

(NPL)

Differences Between Expected

and Actual Experience

(9 year amtz.)

Difference Between

Projected and Actual

Investment Earnings on

Investments (5 year amtz.)

Changes in Actuarial

Assumptions (9 year amtz.)

Differences Between

Expected and Actual

Experience (9 year amtz.)



Pension Expense

1234-00 $2,000,000 $8,000 $8,000 $720 $4,000 $0 $10,000 1245-00 $1,000,000 $4,000 $4,000 $360 $2,000 $0 $5,000 1350-00 $750,000 $3,000 $3,000 $270 $1,500 $0 $3,750

33


Expenses/Deferrals

Increase (Decrease) in Pension Expense Arising from the Recognition of Differencesbetween Projected and Actual Earnings on Pension Plan Investments

Year

Difference between Projected and Actual Earnings on Investments

Amtz. Period (Years) 2015 2016 2017 2018 2019 2020 2021 2022

2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 201620172018

Net Increase (Decrease) in Pens Exp $ 20,541

34


Expenses/Deferrals


Year



2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 2016 $ (159,517) 5 $ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)20172018

Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362)

35


Expenses/Deferrals


Year



2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 2016 $ (159,517) 5 $ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)2017 $ (114,275) 5 $ (22,855) $ (22,855) $ (22,855) $ (22,855) $ (22,855)2018

Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) $ (34,217)

36


Expenses/Deferrals


Year



2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 2016 $ (159,517) 5 $ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)2017 $ (114,275) 5 $ (22,855) $ (22,855) $ (22,855) $ (22,855) $ (22,855)2018 $ 117,285 5 $ 23,457 $ 23,457 $ 23,457 $ 23,457 $ 23,457

Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) $ (34,217) $ (10,760)

37


Deferred BalancesIncrease (Decrease) in Pension Expense Arising from the Recognition of Differences

between Projected and Actual Earnings on Pension Plan Investments

Balances at June 30, 2018

Investment Earnings Less Than Projected

Investment Earnings Greater Than Projected

Amounts Recognized in Pension Expense

through June 30, 2018

Deferred Outflows of Resources

Deferred Inflows of Resources

Year (a) (b) (c) (a) - (c) (b) - (c)

2015 $102,705 $82,164 $20,541

2016 $(159,517) $(95,709) $(63,808)

2017 $(114,275) $(45,710) $(68,565)

2018 $117,285 $23,457 $93,828

$114,369 $(132,373)

38


Deferred BalancesFootnote Disclosure

As of June 30, 2018

Deferred Outflows

Deferred Inflows

of Resources of ResourcesDifference between projected and actual investment earnings 114,369 132,373

Changes of assumptions 1,714 130

Differences between expected & actual experience 24,675 13,598

Changes in proportionate share 82 31

Employer contributions subsequent to the measurement date 1,065 0141,905 146,132

39


Scenario 1Employer contributions paid to PERA between the

Measurement Date and Reporting Date are Deferred Outflows of Resources, not expenses.


Measurement Date



Measurement Period

Measurement Date

ER Contrib

40


Future ExpensesFootnote Disclosure

Year ended June 30:20Y0 $ (21,372)20Y1 11,59320Y2 22,19820Y3 19,37620Y4 12,450

Thereafter 33,468

This schedule will indicate when the accumulated deferred amounts are scheduled to be expensed.

41


OTHER NOTE DISCLOSURES AND RSI SCHEDULES

42


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)

43


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

44


Footnote DisclosuresDisclosure Referenc

eSource Requirement

Total of employer’s pension liabilities, pension assets, deferred outflows/inflows related to pensions, and pension expense for the period (if not identifiable in financials)

74 PERA New

Name of plan, ID of system that administers the plan, ID as agent or cost-sharing plan

76.a PERA or Employer

Existing

Description of benefit terms, including types of employees covered, types of benefits, pension formulas, COLAs, and authority under which benefit terms are established/amended.

76.b PERA or Employer

Existing

Description of contribution requirements, including how contributions are determined, how contribution rates are changed, actual contribution rates, and amount of contributions recognized by the pension plan for that period.

76.c PERA or Employer

Existing (with slight changes)

How to obtain PERA’s CAFR 76.d PERA or Employer

Existing

Significant assumptions/inputs used to measure the total pension liability, including: inflation, salary changes, COLA’s, mortality, and dates of experience studies on which assumptions are based.

77 PERA New

Discount rate applied when measuring TPL and change in the discount rate since the prior measurement date, if any.

78.a PERA (Actuary) New

45


Footnote DisclosuresAssumptions made about projected cash flows when calculating the discount rate

78.b PERA (Actuary) New

Long-term expected rate of return and how it was determined, including significant methods and assumptions used for that purpose.

78.c PERA (SBI) New

If the discount rate incorporates a municipal bond, the bond rate used and source of that rate.

78.d PERA (Actuary) New

Periods of projected benefit payments to which long-term ROR is used and municipal bond rate is used when determining the discount rate

78.e PERA (Actuary) New

Assumed asset allocation of portfolio, long-term expected real ROR for each asset class, and whether ROR is presented as arithmetic or geometric.

78.f PERA (SBI) New

Employer’s NPL calculated using discount rates that are 1% higher and lower than the actual discount rate used to calculate the TPL.

78.g PERA (Actuary) New

Pension plan’s fiduciary net position has been determined on the same basis used by the pension plan, and a brief description of pension plan’s basis of accounting, including policies regarding benefit payments and the valuation of plan investments.

79 PERA New

46


Footnote DisclosuresEmployer’s share of the NPL 80.a PERA (Actuary) New

Employer’s percentage of NPL, the basis on which its proportion was determined, and change in its proportion since the prior measurement date

80.b PERA New

Measurement date of NPL and date of actuarial valuation on which the TPL is based.

80.c PERA New

Assumption changes or other inputs that affected measurement of the TPL since the prior measurement date

80.d PERA New

Changes of benefit terms that affected measurement of the TPL since the prior measurement date

80.e PERA New

Nature of changes between measurement date of collective NPL and employer’s reporting date if they are expected to have a significant effect on the employer’s share of the NPL.

80.f PERA or Employer

New

Amount of pension expense recognized by the employer in the reporting period.

80.g PERA or Employer

New

47


Footnote DisclosuresEmployer’s balances of deferred outflows/inflows related to pensions, classified in 5 categories: Differences between expected and actual

experience Changes of assumptions/inputs Difference between expected and actual

earnings Changes in employer’s proportion and

differences between contributions made and employer’s proportionate share of contributions

Employer’s contributions to the pension plan subsequent to the measurement date

80.h PERA and Employer

New

Schedule showing net amount of balances of deferred outflows/inflows that will be recognized in the employer’s pension expense and recognized as a reduction in the collective net pension liability in the future.

80.i PERA and Employer

New

Amount of revenue recognized for the support provided by non-employer contributing entities, if any.

80.j Employer New

48


Required Supplementary Information (RSI)

GASB 27—None required

GASB 68—2 new 10-year schedules required

Schedule of Proportionate Share of the NPL

Schedule of Employer Contributions

Separate schedule for each plan

Notes to RSI will include significant changes in actuarial assumptions, benefit provisions, etc. that affect the identification of trends in RSI schedules.

49


Schedule of Proportionate Share of the NPL

6/30.

CITY’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITYPERA General Employees Retirement Fund

Last 10 Fiscal Years* (Dollar amounts in thousands)

50


Schedule of Employer Contributions

PERA General Employees Retirement FundLast 10 Fiscal Years

(Dollar amounts in thousands)

51


GASB 71

52


GASB 71Amends transition provisions found in paragraph

137 of Statement 68

Allows all deferred inflows and outflows related to pensions to start at 0…except employer contributions

Employer contributions included in initial measurement period but already expensed (closed to net position) are to be reclassified

Adjusts deferred outflows and net position

53


GASB 71Employer contributions already expensed during

initial measurement period are reclassified


Measurement Date



Measurement Period

Measurement Date

ER Contrib

54


Transition Year Journal EntriesEmployer contributions already expensed during

initial measurement period are reclassified


Measurement Date

NPL: $2,650,000 Employer’s Fiscal Year End(Reporting Date)


Measurement Period

Measurement Date

NPL: $2,500,000

$45,000

55


Transition Year Journal Entries1) To record beginning net pension liability (6/30/14)

Net Position $2,500,000

Net Pension Liability$2,500,000

2) To record ER contributions expensed in previous year but fall within measurement period

Deferred Outflow $ 45,000Net Position $

45,000 56


AUDIT ISSUES

57


Audit IssuesAICPA issued 3 whitepapers

Issues Related to Information for Employer Reporting—Cost Sharing Plans

Issues Associated with Testing Census Data Issues Related to Information for Employer Reporting—

Agent Multiple-Employer PlansIssued Interpretations to 3 AU-C sections

AU-C 500 AU-C 600 AU-C 805 Moving to audit guide next year

Links on www.aicpa.org (Search for “GASB Matters”)

58


Audit Issues--ProblemAudited financial statements of the plan only include

disclosure of the collective net pension liability for the plan as a whole. They do NOT include:• Deferred outflows/inflows of resources by category• Pension expense• Each participating employer’s share of collective

pension amountsAudited financial statements of the plan may not

include necessary information to calculate allocation percentages

59


Audit Issues--ProblemGAAP financial statements of the plan and additional

unaudited information from the plan will NOT provide sufficient appropriate audit evidence for the governmental employer auditor.Absent additional audit evidence from the cost-sharing

plan, the employer auditor would not likely be able to accumulate sufficient appropriate audit evidence.

If unable to accumulate sufficient appropriate evidence, the employer auditor should modify the audit opinion.

(AU-C section 9500, Question 2)

60


Audit Issues--SolutionPlan prepares “schedule of employer allocations” for

which plan auditor is engaged to provide opinionUse allocation method based on covered payroll or

actual contributions if they are expected to be representative of future contributions

This schedule does not need to be included in the plan’s CAFR

61


Audit Issues--Solution

62


Audit Issues--SolutionPlan prepares “Schedule of Pension Amounts by

Employer” for which plan auditor engaged to provide opinionSchedule includes the following elements for each

employer:• Net pension liability• Deferred outflows of resources by category• Deferred inflows of resources by category• Pension expense

An alternative would be to prepare a “Schedule of Collective Pension Amounts” for the plan as a whole

63


Audit Issues--Solution

COST SHARING PENSION PLANSchedule of Pension Amounts by Employer

As of and for the year ended 6/30/2015

Deferred Outflows of Resources Deferred Inflows of Resources

Employer


(NPL)

Differences Between Expected

and Actual Experience

(9 year amtz.)

Difference Between

Projected and Actual

Investment Earnings on

Investments (5 year amtz.)



Differences Between

Expected and Actual

Experience (9 year amtz.)



Pension Expense

1234-00 $2,000,000 $8,000 $8,000 $720 $4,000 $0 $10,000 1245-00 $1,000,000 $4,000 $4,000 $360 $2,000 $0 $5,000 1350-00 $750,000 $3,000 $3,000 $270 $1,500 $0 $3,750

64


Audit Issues—Census DataUnderlying census data from employers should be

tested by plan’s auditorRisk-based approach by plan auditor to select

employers to test (review payroll registers).Size of Employer:Largest employers (e.g. > 5% of plan) tested on a 5-

year cycle (Hennepin County)Smallest employers will never be tested (e.g. 1100

employers represent 2% in aggregate of plan)Everyone else tested on a 10-year cycle

65


Audit Issues—Census DataOther risk factors to consider:

Past errors or control deficiencies of an employerNew employerWhether employer financial statements have received

unmodified opinionsLength of time since procedures last performed for an

employerNews stories

66


Audit Issues—Census DataPlan auditor selects which employers should be

tested each year

Plan auditor may engage local government auditors in accordance with AT (Attest) Section 101 to provide opinion on accuracy of census data reported to plan

67


Audit IssuesActuarial valuation reports will be posted on PERA’s

website

Two valuation reports for each planGASB 67/68 Compliant

Funding

Use to verify collective levelpension costs

68

American Institute of CPAs® 69Governmental Audit Quality Center

Cost-Sharing Plans: Employer Responsibilities

• Complete and accurate census data to plan

• Appropriateness of information used to record financial statement amounts

• Whether plan auditor’s report on schedules are adequate and appropriate for employer purposes

• Amounts in schedules specific to employer• employer amount used in allocation percentage

(numerator)• recalculate allocation percentage of employer• recalculate allocation of pension amounts based on

allocation percentage of employer

Report

Evaluate

Verify & Recalculate

American Institute of CPAs® 70Governmental Audit Quality Center

Cost-Sharing Plans: Employer Auditor Responsibilities

• Sufficiency and appropriateness of audit evidence

• Whether plan auditor’s report on schedules are adequate and appropriate for auditor purposes (e.g., evidence)

• Review plan auditor’s report and any related modifications• Evaluate whether plan auditor has necessary competence

and independence• Determine whether named as specified user

• Amounts in schedules specific to employer• Employer amount used in allocation percentage

(numerator)• Recalculate allocation percentage of employer• Recalculate allocation of pension amounts based on

allocation percentage of employer

• Census data submitted to plan

Determine

Evaluate

Verify & Recalculate

Test


FIRE RELIEF ASSOCIATIONS

71


Fire Relief AssociationsOffice of the State Auditor’s June 2014 Pension

Division NewsletterCities that prepare financial statements in accordance

with GAAP need to include the NPL and pension expense of the affiliated relief association If amounts are material If the fire department is a city fire department (not an

independent non-profit firefighting corporation)Alternative to costly actuarial valuation—accept liability

amounts calculated using State Auditor’s annual Schedule Form if difference is not significant

72


Fire Relief AssociationsMost relief associations are overfunded, so NPL will

be a Net Pension Asset.

Work with relief associations and cities now!

Cities/Townships whose fire departments have joined PERA’s Statewide Volunteer Firefighter Retirement Plan will be provided with GASB 68 schedules

73


Single/Agent PlansFewer footnote disclosures

One additional footnote schedule

Schedule of Changes in the Net Pension Liability

One additional RSI schedule

10-year Schedule of Changes in the NPL

74


Changes in the NPL Note Disclosure

Increase (Decrease)

Total Pension Liability

Plan Fiduciary Net Position


(a) (b) (a) - (b)Balances at 6/30/X8 $2,853,455 $2,052,589 $800,866 Changes for the year:

Service cost 75,864 75,864 Interest on the TPL 216,515 216,515 Differences between expected and actual experience (37,539) (37,539)Contributions--employer 79,713 (79,713)Contributions--employee 31,451 (31,451)Net investment income 196,154 (196,154)Benefit and refund payments (119,434) (119,434) - Administrative expenses (3,373) 3,373 Other changes 8 (8)

Net changes 135,406 184,519 (49,113)Balances at 6/30/X9 2,988,861 2,237,108 751,753

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More Information

PERA’s Websitewww.mnpera.orgEmployers tabGASB 68 Toolkit

Contact Dave DeJonge [email protected]

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public employees retirement association of minnesota the nuts and bolts of gasb 68 implementation...

Documents

gasb pension expenses

gasb statements

employer gasb

bolts of gasb

pera slide

pension plan

peras employers

past contributions gasb