Transcript GASB Statements 67 and 68 - Milestone Professional Services

The New Pension Standards
GASB Statements 67 and 68
Milestone Professional Services, CPE Day
September 13, 2013, Kissimmee FL
Mark White CPA, Audit Partner
Purvis Gray & Company, LLP
Tallahassee / Gainesville / Ocala / Sarasota
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Experience
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No!…. Anything But Pension CPE!
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Experience
Assurance
Two New Statements Issued June 2012
No. 67
Plan
Reporting
No. 68
Employer
Amends
No. 25
Effective
FYE 2014
Precision
Experience
Reporting
Amends
No. 27
Effective
FYE 2015
Assurance
3
The GASB’s Deliberative Process
Research
Project
Agendas
2006/2008
Exposure
Draft 2011
Final
Statements
Issued
2012
Invitation To
Comment
2009
Preliminary
Views
2010
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Experience
Assurance
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The No. 68 Big Picture
Unfunded
Defined Benefit
Pension Liability
Will Now Be
Booked in BS
of Economic
Resources FS
Formerly
Disclosed In
Notes & RSI
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Experience
Assurance
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Highlights of No. 67 – Plan Reporting
Very Few FS
Recognition Changes
From No. 25
Change In
Pension
Liability
Clarified That Drop
Liability Not
Recorded During
Buildup
Applies to Pension Plan
FS Issued Separately or
as P/T/F of Local
Government
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Experience
Notes and
RSI Changes
Annual Rate
of Return on
Plan Assets
Aggregate
Employer
Information
Assurance
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Who is included?
Applies Equally To;
Local
Municipal
Plans
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Experience
MultiMultiEmployer
Employer
Agent Plans Cost Sharing
(FLC)
Plans (FRS)
Assurance
Implementation
• Applied Retroactively, Restate Opening Equity and
New Pension Liability at BOY (PPA Like)
• Applied Retroactively, Restate Opening Deferred
Inflows if Available, Otherwise Start at Zero
• This is Unlike No. 45 OPEB Implementation Which
is Being Re-examined and May Soon Change
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Assurance
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Up Until Now
•
•
Government-wide employer accounting and actuarial
funding/contributions have been ONE
Old GASB Statement No. 27 (current)
–
–
–
The employer’s obligation is to fund the plan
The accounting expense (ARC) -an actuarial funding contribution
Member
The balance sheet liability -contribution
Funding Obligation
shortfall
Employer
Precision
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Experience
Assurance
Plan
Up Until Now
Accounting
Precision
10
Experience
Assurance
Same
Funding
From Now On
• Government-wide employer accounting and funding
have been delinked, decoupled, . . . DIVORCED !
Accounting
Precision
11
Experience
Assurance
Funding
From Now On
•
Accounting and actuarial funding will be separate
•
The GASB has found a completely new, way to define
the government-wide expense and liability
•
“We do accounting; actuaries do funding.” – Bob
Attmore, GASB Chairman
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Experience
Assurance
From Now On
•
•
Now the GASB is looking at it this way:
New GASB Statement No. 68
–
–
The employer’s obligation is “ultimately to the members”
The accounting expense -- not determined w.r.t. to any
actuarial funding contribution
•
Member
The balance sheet liability --an
unfunded actuarial accrued
liability
Employer
Plan
Funding
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Experience
Assurance
Two Actuarial Reports Now Needed
Actuarial Report
For Accounting
Actuarial Report
For Funding
Likely Done at the
Same Time From Same
EE Demographics
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Experience
Assurance
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The New Pension Liability Equation
TPL
•Total Pension Liability, Minus
NPP
•Net Plan Position, Equals
NPL
•Net Pension Liability
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Assurance
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Terminology-Definitions
• New (GASB 67/68)
– Total Pension Liability (TPL) – the portion of the actuarial present
value of projected benefit payments that is attributable to past
periods of employee service in conformity with the requirements of
Statement 68.
– Net Plan Position - Fair Value of Plan Assets less plan liabilities - FMV
as of the measurement date (no longer smoothed
– Net Pension Liability (NPL) – difference between the TPL and the value
of plan assets available to pay pension benefits.
– Projected Benefit Payments – All benefits estimated to be payable
through pension plan to current active and inactive employees as a
result of their past service and their expected future service.
– Measurement Date - TPL and NPL measured as of the same date not
more than 12 months before the reporting date.
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TPL Illustrated
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Assurance
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Calculating The Net Pension Liability
Discount Rate = LTEROR For Plan Assets
Net Plan Position = No More Asset Smoothing
TPL Calculated Using Entry Age Normal A/C/M Only
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Pension Expense
Pension
Expense =
Change in NPL
Change in
TPL
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Change in
NPP
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Immediate vs. Gradual Recognition
Change in
TPL
Precision
Change in
NPP
Expense Some
Parts Immediately
Expense Some
Parts Immediately
Expense Some
Parts Gradually
Expense Some
Parts Gradually
Deferred
In/Outflows
Deferred
In/Outflows
Experience
Assurance
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Changes in TPL Expensed Immediately
Annual
Service
Cost
Interest
on PY
NPL
Expense
Immediately
Benefits
Paid
Plan
Benefit
Changes
Precision
Experience
Assurance
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Changes in TPL Expensed Gradually
Assumption
Changes
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Experience
Expense
Gradually
Actuarial
Gains and
Losses
Assurance
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Changes in NPP
Gradual Recognition
For Difference In
Projected Vs. Actual
Investment Earnings
Actual
Contributions
Projected
Investment
Earnings
Recognized
Immediately
Benefits Paid
Administrative
Expenses
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Experience
Assurance
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Deferred Inflows and Outflows
Concept
Statement No.
4
GASB 65 –
Items
Previously
Recognized
GASB 53
Derivatives
Deferred
Inflows and
Deferred
Outflows
GASB 68 –
Pensions
GASB 60 SCA
GASB 63
Financial
Reporting
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Experience
Assurance
Calculation of Pension Expense
Balances at 12/31/X8
Changes for the year:
Service cost
Interest
Changes of benefit terms
Differences between expected and actual
experience
Changes of assumptions
Contributions—employer
Contributions—employees
Net investment income
Benefit payments, including refunds
Administrative expense
Other
Expense for beginning deferred amounts
Net changes
Balances at 12/31/X9
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Experience
Total Pension
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability
(a) – (b)
$
$
$
3,045,893
762,560
101,695
231,141
-
101,695
231,141
-
(69,638)
-
(69,638)
(109,544)
(51,119)
(199,273)
3,427
(8)
109,544
51,119
199,273
(126,863)
(3,427)
8
(126,863)
$
2,283,333
136,335
3,182,228
Assurance
$
229,654
2,512,987
$
(93,319)
669,241
Deferred
Outflows of
Resources
$ 289,881
Deferred
Inflows of
Resources
$
Pension
Expense
30,107
$ 101,695
231,141
-
(16,804)
(60,320)
(77,124)
$ 212,757
$
63,582
-
(6,056)
-
-
(51,119)
(182,469)
(3,592)
59,990
90,097
3,427
(8)
56,728
$ 153,339
Timing Issues
Financial Reporting Actuarial Valuation
Required Every Two Years, Can Do an Update
In Between
Full
Actuarial
Report
Precision
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Experience
Actuarial
Update
Assurance
Full
Actuarial
Report
Timing Issues
Actuarial Valuation
completed within 30
months and 1 day of
RD – 3/31/12
Precision
Experience
Measurement Date
Must Be Within 1
Year of RD - 10/1/14
Reporting Date (RD)
FYE 9/30/15
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Timing Issues
Prior FYE
30 months + 1 day
3/31/12
9/30/13
Beg Bal.
Date
Actuarial
Valuation Date
Employer FYE
Precision
Experience
9/30/14
MD
Assurance
9/30/15
FS Date
Measurement
Date
Timing Issues
FYE 9/3015
• Get AV as of 9/30/14 or Roll Forward
Municipal Audit of 9/30/13 AV to 9/30/14
FYE 9/30/15
County Audit
• Get Allocated FRS AV as of 6/30/15 or
Roll forward of 6/30/14 AV to 6/30/15
FYE 6/30/15
School Bd. Audit
Precision
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Experience
• Get Allocated FRS AV as of 6/30/14
Assurance
Contributions Made After MD
Prior FYE
30 months + 1 day
Contributions
Made - Deferred
Outflow
3/31/12
9/30/13
Beg Bal.
Date
Actuarial
Valuation Date
Employer FYE
Precision
Experience
9/30/14
MD
Assurance
9/30/15
FS Date
Measurement
Date
Note Disclosure
•
Additional disclosures Depends Upon Plan Type - Generally:
– In the Notes to Financials
• Plan description, benefit terms, employee groups
• Changes in all components of the NPL
• Significant Assumptions – discount rate, mortality, etc.
Numerous other disclosures
– In the Required Supplementary Information
10 Year table(s) for: TPL, Plan Net Position, NPL, Net Position
as a % of TPL, Covered Payroll (PR), NPL as % of Covered
Payroll, Required & Actual Contributions, Covered PR,
Contributions as % of PR.
• Other disclosures
Precision
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Experience
Assurance
High-Level Implications
Liability From
Notes to BS
Higher Profile
in CAFR
Net
Position
May Go
Negative
More Fuel to Pension Rollback Movement
Precision
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Experience
Assurance
High-Level Implications
More Volatile FS as
Pension Liability
and Expense
Bounce With
Market Fluctuations
Precision
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Experience
Assurance
High-Level Implications
Communication
Challenges
Employees
Press
Executive
Staff and
Elected
Officials
Precision
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Experience
Assurance
High-Level Implications
Amortization Periods
and Methods
Revisit Funding
Policies
Disciplined Process
For LTEROR
Actuarial Cost
Methods
Precision
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Experience
Assurance
High-Level Implications
Local
Governments
Start Talking With Your
Actuary and Auditors Now
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Experience
Assurance
Rush For
Actuarial
Services
Wow, That Was Sure A Lot Of Fun!
Precision
Experience
Assurance
The New Pension Standards
GASB Statements 67 and 68
Milestone Professional Services, CPE Day
September 13, 2013, Kissimmee FL
Mark White CPA, Audit Partner
Purvis Gray & Company, LLP
Tallahassee, Gainesville, Ocala, Sarasota
Precision
Experience
Assurance
38