Transcript GASB Update by Pat Robertson - LAPERS Louisiana Association of

GASB Pension Standards Update
Pat Robertson
Executive Director
September 2014
A Look at PERS of MS
• Mississippi’s only state-sponsored retirement system
• Governmental defined benefit plan qualified under Section
401(a) of the Internal Revenue Code
• Established by state Legislature in 1952 to provide benefits
to eligible Mississippi public employees working for state
agencies, universities, community colleges, and public
schools, as well as counties, cities, and other participating
political subdivisions.
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A Look at PERS of MS
• Plans Include:
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Public Employees’ Retirement System
Mississippi Highway Safety Patrol Retirement System
Municipal Retirement Systems – 19 Systems
Supplemental Legislative Retirement
Mississippi Government Employees’ Deferred Compensation
Plan & Trust
• Current Statistics – June 30, 2014:
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886 employers
291,073 members
97,044 retirees
$25.3 billion in assets
• Annual Payroll
– $2.03 billion
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GASB Accounting Standards
• GASB Statement No. 67, Financial Reporting for Pension
Plans, amends Statement 25
– Effective for fiscal years beginning after June 15, 2013
• GASB Statement No. 68, Accounting and Financial Reporting
for Pensions, amends Statement 27 for employers
– Effective for fiscal years beginning after June 15, 2014
• GASB Statement No. 71, Pension Transition for Contributions
Made Subsequent to the Measurement Date, clarifies
Statement 68
– Apply simultaneously with Statement 68
• Statements and Implementation Guides available at
www.gasb.org
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Key Concepts
•
Pensions are part of the exchange between employees and
employers
– Promised benefits are part of the total compensation package for
employees
– The employer is obligated to provide benefits as a result of the
employment exchange
– The cost should be recognized in the current service period
•
The plan is responsible for assets
•
The employer is responsible for benefit promises beyond those
covered by assets
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GASB’s Defined Benefit Plan
Categories
• Single-employer DB plan
– Provides pensions to employees of one employer
• Agent multiple-employer DB pension plan
– Provides pensions to employees of more than one plan
– Assets are pooled but separate accounts are maintained
– Employer’s share of assets legally available for its own employees
• Cost-sharing multiple-employer DB pension plan
– Provides pensions to employees of more than one employer
– Employers pool obligations
– Assets used for benefits of any employee
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Total Pension Liability
• Determined using Entry Age normal cost method
• Use single discount rate if contributions and assets not
sufficient to pay projected benefits
– Long-term expected rate – Use to extent projected plan
fiduciary net assets are sufficient to pay future benefits
– Municipal bond index rate – Use for portion of future
benefits not covered by projected fiduciary net assets
– If both rates used, combine to form a blended single
discount rate
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Plan Fiduciary Net Position
• Assets held by the plan including contributions and
investment assets
• FNP is the responsibility of the plan administrator
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Net Pension Liability
TPL – FNP = NPL
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Pension Expense
• Recognition of changes to NPL applicable to the current
reporting period:
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Service cost – Increases PE
Interest on the TPL – Increases PE
Projected investment earnings – Decreases PE
Member contributions – Decreases PE
Administrative costs – Increases PE
Changes in benefit terms affecting TPL – Increases or
decreases PE
– Current portion of deferred outflows/inflows of resources –
Increases or decreases PE
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Deferred Outflows/Inflows of
Resources
• Recognized over average expected remaining service lives of
actives and inactives:
– Actual versus expected demographic factors – actuarial
experience
– Changes in assumptions
– For cost-sharing employers:
» Actual versus proportionate share of contributions – Not
necessary when actual contributions are used as the basis
for proportional share
» Change in employer proportion from one measurement
period to the next
• Recognized over a closed 5-year period
» Actual versus projected investment earnings
• Layers must be tracked
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Example: Schedule of Plan
Pension Amounts by Employer
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Transition Planning
• Collective amounts to be provided by the plan
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Total pension liability
Fiduciary net position
Net pension liability
Pension expense
Deferred outflows/inflows of resources
• Employer’s proportionate share
– Basis for determination
• Method of communicating with employers
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GASB Proportionate Share
Cost-Sharing System Example
Employer
City of Clayborne
Contributions
Proportionate
Share
$1,227,329,600
32.9051%
Cedar Medical Center
446,524,900
11.9715%
City of Smithville
408,734,200
10.9583%
Johnson County
376,868,300
10.1039%
City of Woodville
251,127,000
6.7328%
State University
234,263,200
6.2807%
Lincoln County Schools
226,256,200
6.0660%
Estes Public Schools
208,201,900
5.5819%
Washington County
199,048,800
5.3365%
Best Community College
151,557,800
4.0633%
Total Plan
$3,729,911,900
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Example Schedule of
Collective Pension Amounts
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Employer Developed
Schedules
Example Cost-Sharing Pension Plan
Schedule of Pension Amounts for an Employer
As of June 30, 2015
Pension
Deferred Outflows of Resources - Current Year
Deferred Inflows of Resources - Current Year
Changes in
Employer
Total Plan
City of Clayborne
Changes in
Net Difference
Proportion
Net Difference
Proportion
Between
and Differences
Between
and Differences
Difference Projected
Between
Expense - CY
Total
Difference Projected
ER Contributions Deferred
Net
Expected Investment
Changes and Proportionate Outflows
Pension
and Actual Earnings on
Liability
Experience InvestmentsAssumptions Contributions
Resources
$1,206,453 $4,315,618 $3,860,253
-
$9,382,324
$978,435
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-
-
$978,435
$5,243,245
-
2,497,338
262,881
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-
-
262,881
1,194,448
$124,325,432
40,909,408
324,143
1,136,045
1,037,150
Share of ER
of
and Actual
Total
Between and Actual
of
Between
Between
Expected Investment
and Actual Earnings on
ER Contributions Deferred
Changes and Proportionate Inflows
of
Share of ER
of
Experience Investments Assumptions Contributions Resources
Pension
Expense
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Employer Developed
Schedules - Deferred Outflows
Fiscal Year Ended:
6/30/2015
Employer:
City of Clayborne
Current Year Proportionate Share:
Average Remaining Service Life:
32.9051% (PERS will provide)
5.45 years (PERS will provide)
Differences Between Expected and Actual Experience
Total
Employer
Plan
Proportionate
Total Deferred Outflows Amount
Share
Diff Expected Vs Actual
$1,206,453
32.9051%
Diff Proj vs Act Inv.
4,315,618
32.9051%
Changes in Assumptions
3,860,253
32.9051%
Amortized Amounts:
Diff Expected Vs Actual
Diff Proj vs Act Inv.
Changes in Assumptions
Total
2015
72,841
284,012
233,068
589,921
Summary of Deferred Outflows:
Diff Expected Vs Actual
Diff Proj vs Act Inv.
Changes in Assumptions
Deferred
Additional Expense:
Diff Expected Vs Actual
Diff Proj vs Act Inv.
Changes in Assumptions
Expensed
72,841
284,012
233,068
589,921
Total
Amortized
Employer
Amort.
Annual
Amount
Period
Amount
$396,984
5.45
$72,841
1,420,057
5.00
284,011
1,270,218
5.45
233,068
2016
72,841
284,012
233,068
589,921
2017
72,841
284,011
233,068
589,920
2018
72,841
284,011
233,068
589,920
2019
72,841
284,011
233,068
589,920
72,841
284,012
233,068
589,921
72,841
284,011
233,068
589,920
72,841
284,011
233,068
589,920
72,841
284,011
233,068
589,920
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0
0
0
2020
32,779
2022
2023
0
0
0
Total
396,984
1,420,057
1,270,218
0 3,087,259
0
324,143
1,136,045
1,037,150
0 2,497,338
104,878
137,657
2024
32,779
104,878
137,657
0
2021
0
0
0
0
0
0
72,841
284,012
233,068
0
589,921
3,087,259
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Employer Developed
Schedules
Example Cost-Sharing Pension Plan
Schedule of Pension Amounts for an Employer
As of June 30, 2015
Deferred Outflows of Resources - Current Year
Employer
Total Plan
City of Clayborne
Net
Pension
Liability
$124,325,432
40,909,408
Changes in
Net Difference
Proportion
Between
and Differences
Difference Projected
Between
Total
Between and Actual
ER Contributions Deferred
Expected Investment Changes and Proportionate Outflows
and Actual Earnings on
of
Share of ER
of
Experience InvestmentsAssumptions Contributions Resources
$1,206,453 $4,315,618 $3,860,253
324,143
1,136,045
1,037,150
Deferred Inflows of Resources - Current Year
Changes in
Net Difference
Proportion
Between
and Differences
Difference Projected
Between
Total
Between and Actual
ER Contributions Deferred
Expected Investment Changes and Proportionate Inflows
and Actual Earnings on
of
Share of ER
of
Experience Investments Assumptions Contributions Resources
Pension
Expense - CY
Pension
Expense
-
$9,382,324
$978,435
-
-
-
$978,435
$5,243,245
-
2,497,338
262,881
-
-
-
262,881
1,194,448
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Employer Developed
Schedules - Deferred Inflows
Fiscal Year Ended: 6/30/2015
Employer:
City of Clayborne
Current Year Proportionate Share:
Average Remaining Service Life:
32.9051% (PERS will provide)
5.45 years (PERS will provide)
Differences Between Expected and Actual Experience
Total Deferred Inflows
Diff Expected Vs Actual
Amortized Amounts:
Diff Expected Vs Actual
Total Proportionate Employer Amort. Annual
Amount
Share
Share
Period Amount
$978,435
32.9051%
$321,955
5.45
$59,074
2015
59,074
Summary of Deferred Inflows:
Expensed
59,074
Deferred
2016
59,074
59,074
2017
59,074
59,074
2018
59,074
59,074
2019
59,074
59,074
2020
26,585
26,585
2021
0
2022
0
2023
0
2024
Total
321,955
59,074
0 262,881
321,955
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Employer Developed
Schedules – Pension Expense
Fiscal Year Ended:
Employer:
6/30/2015
City of Clayborne
Current Year Pension Expense Reported at the Plan Level
Total Plan
Year
2015
Pension
Expense
$5,243,245
Employer
Proportionate
Share
32.9051%
Employer
Share of
Expense
$1,725,295
Summary Calculation of Total Employer Pension Expense:
Year
2015
Employer
Proportionate
Expense From
Expense From
Deferred
Deferred
Share of
Total
Outflows
Inflows
Current Year
Employer
Recognized
Recognized
$59,074
Pension Expense
$1,725,295
<$589,921>
Pension Expense
$1,194,448
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Employer Developed
Schedules
Example Cost-Sharing Pension Plan
Schedule of Pension Amounts for an Employer
As of June 30, 2015
Deferred Outflows of Resources - Current Year
Employer
Total Plan
City of Clayborne
Net
Pension
Liability
$124,325,432
40,909,408
Changes in
Net Difference
Proportion
Between
and Differences
Difference Projected
Between
Total
Between and Actual
ER Contributions Deferred
Expected Investment Changes and Proportionate Outflows
and Actual Earnings on
of
Share of ER
of
Experience InvestmentsAssumptions Contributions Resources
$1,206,453 $4,315,618 $3,860,253
324,143
1,136,045
1,037,150
Deferred Inflows of Resources - Current Year
Changes in
Net Difference
Proportion
Between
and Differences
Difference Projected
Between
Total
Between and Actual
ER Contributions Deferred
Expected Investment Changes and Proportionate Inflows
and Actual Earnings on
of
Share of ER
of
Experience Investments Assumptions Contributions Resources
Pension
Expense - CY
Pension
Expense
-
$9,382,324
$978,435
-
-
-
$978,435
$5,243,245
-
2,497,338
262,881
-
-
-
262,881
1,194,448
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Timing and Frequency of
Measurements
• Reporting date – plan’s fiscal year-end
• Measurement date – date as of which TPL, FNP and NPL are
determined
• Actuarial valuation date – date as of which TPL is determined
and date of the actuarial valuation
– Should be performed at least biennially
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Timing and Frequency of
Measurements
• If valuation date is before the reporting date, TPL is rolled
forward to the reporting date
– Valuation can be no older than 30 months and 1 day from
the employer’s fiscal year-end
– Update procedures are used to roll forward to the
measurement date
– Use professional judgment to determine extent of
procedures
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Example of Roll Forward of
Total Pension Liability
Actuarial valuation date 6/30/2013
Roll forward TPL to 6/30/2014 measurement date:
TPL 6/30/2013
$110,000
Plus service cost
5,200
Plus interest
7,900
Minus benefit payments
(8,500)
TPL 6/30/2014
$114,600
TPL minus the market value of assets at the measurement date
(6/30/2014) is the NPL
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Special Funding Situations
• Non-employer is legally responsible for making
contributions directly to the plan for employees of another
entity and either of the following:
– Contributions from the non-employer are not dependent on
circumstances or events which are unrelated to pensions
– The non-employer is the only entity with a legal obligation to
make contributions
• Does not include circumstances in which resources are
provided to the employer
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Auditing Considerations
• Three Whitepapers were issued by the AICPA related to
GASB 67 and 68 cost-sharing and single plans and
participating employers
– Governmental Employer Participation in Cost-Sharing
Multiple-Employer Plans: Issues Related to Information for
Employer Reporting
– Single-Employer and Cost-Sharing Multiple-Employer Plans:
Issues Associated with Testing Census Data in an Audit of
Financial Statements
– Governmental Employer Participation in Agent MultipleEmployer Plans: Issues Related to Information for Employer
Reporting
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Auditing Considerations
Cost-Sharing Multiple-Employer Plans
Testing of Underlying Census Data
• Risk-based approach by plan auditor to select
employers to test
• Employer auditor may perform procedures under
examination engagement in accordance with AT (Attest)
section 101
• Absence of effective management procedures and
controls by plan to verify census data is considered a
control deficiency and will impact level of auditor testing
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Auditing Considerations
Cost-Sharing Multiple-Employer Plans
and Participants
• Three interpretations to AU-C Sections have been issued
by the AICPA
– AU-C 500: Audit Evidence
– AU-C 600: Audits of Group Financial Statements (Including
the Work of Component Auditors)
– AU-805: Special Considerations-Audits of Single Financial
Statements and Specific Elements, Accounts, or Items of a
Financial Statement
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Auditing Considerations
Cost-Sharing Multiple-Employer Plans
AICPA Recommendations
• Plan prepares “schedule of plan pension amounts by employer”
for which plan auditor engaged to provide opinion
– Supplemental schedule of plan pension amounts by employer
includes net pension liability, deferred outflows/inflows of
resources, and pension expense for each employer
– Alternative to include a “schedule of collective pension amounts”
for the plan as a whole
– Plan auditor needs to consider the appropriateness of the
materiality used in the audit of plan financial statements
• Employer auditor issues opinion on total of each of the four
elements in accordance with AU-C 805
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Auditing Considerations
Agent Multiple-Employer Plans
• Two Whitepapers
– Governmental Employer Participation in Agent MultipleEmployer Plans: Issues Related to Information for
Employer Reporting – Issued
– Agent Multiple-Employer Plans: Issues Associated with
Testing Census Data in an Audit of Plan Financial
Statements
» Issues and potential recommendations are more
complex
» Not yet available
– Four Audit Interpretations
» Not yet available
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Issues Considered
• We are currently working to resolve census data testing
challenges
– Working with the Mississippi State Audit Department, our
independent accounting firm, our actuaries and the state as
an employer
– Issues of timing and meeting our CAFR release deadline
• Use of a roll forward from a prior period in financial
reporting.
• Note disclosure for the plan under GASB 67 and the
employers under GASB 27
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Other Issues Considered
• Excluding small immaterial pension plans from the plan
and employer’s financial reports
• Inquiries about allocating NPL to departmental financial
statements
• AICPA white paper regarding agent multiple-employer
plans
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Transition
• Communications essential to successful
implementation
• MS PERS transition efforts
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Employer eUpdate
Mississippi Implementation Work Group
Pension Standards Implementation Work Group
Communications with Users
• Challenges for employers and public pension plans
are many and time is here
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GASB 67 Note Disclosure
All Plans
Plan Description
Plan Investments
Name, type, board, members
Investment policy authority
Classes covered, authority
Allocation requirements,
greater than 5%
Benefits, contributions, DROP
Money weighted ROR
34
GASB 67 Note Disclosure
Single and Cost-Sharing Plans
NPL Components
Total pension liability
Significant
Assumptions
Discount rate
Fiduciary net position
LT expected ROR overall
and by asset class
Net pension liability
Sensitivity measures on
discount rate + and – 1%
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GASB 67 Required
Supplementary Information
(RSI)
10 Yr NPL & Change
In NPL
Beginning & ending TPL, NPL
Actuarial Required
Contributions 10 Yrs
Required contributions
Effects of underlying parts
Actual contributions
Revenue & expenses
Difference, % of total
payroll
36
GASB 68 Note Disclosure
Single and Agent Plans
Plan Description
Name, type, terms, admin.
Assumptions
All NPL assumptions
Classes covered, benefits,
authority
LT expected ROR overall
and by investment class
No. participants and
contributions
Sensitivity measure for
discount rate + and – 1%
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GASB 68 Note Disclosure
Single and Agent Employers
Change in NPL
Beginning & ending TPL,
NPL
Other Information
Measurement date of NPL,
changes from measurement
date to reporting date
Interest on TPL, difference in
expected & actual
Makeup of deferred outflows/
inflows of resources
Contributions, benefits
5 year expected changes in
deferred outflows/inflows
38
GASB 68 RSI
Single and Agent Plans
10 Yr. NPL & Change In NPL
Beginning & ending TPL,
NPL
10 Yr. Schedules of:
Actuarial contributions,
required & actual
Interest on TPL, difference in
expected & actual
Difference in above
Contributions, benefits
Actual contributions as %
of covered payroll
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Questions?
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