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Your Tilted Balance Sheet – GASB 68 Overview. September 12, 2013. Presented by: Kevin S. Wong, CPA Gilbert Associates, Inc. kswong@gilbertcpa.com. Background and Overview. Background Project initiated in January 2006 Exposure draft issued June 2011 Final standard issued June 2012.
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Your Tilted Balance Sheet – GASB 68 Overview September 12, 2013 Presented by: Kevin S. Wong, CPA Gilbert Associates, Inc. kswong@gilbertcpa.com
Background and Overview Background • Project initiated in January 2006 • Exposure draft issued June 2011 • Final standard issued June 2012
Background and Overview (Continued) Overview • Amends current GASB requirements that focus more on required contributions
Background and Overview (Continued) • Implementation date • Fiscal years beginning after June 15, 2014 (years ending June 30, 2015, December 31, 2015)
Big Picture – why? • Better transparency, consistency, and comparability with regard to pension costs • No more “kicking the can down the road” • Changes focus from a “funding” approach to “earnings” approach • Liability for benefits “earned” vs. contributions “paid”
Big Picture – why? (Continued) Recognition of the entire net pension liability A more comprehensive measure of pension expense Pension Actuaries full employment act
Required Calculations Net Pension Liability Pension expense Pension-related deferred outflows/inflows
What kind of plan do you have? Single employer • Benefits the employees of only one employer Agent multiple employer • Assets are pooled for investment purposes but legally segregated
What kind of plan do you have? (Continued) Cost-sharing, multiple employer • Participating employers pool their pension obligations • Plan assets can be used to pay any participating employer’s pension • Most JPA staff participate in CalPERS’ 2.0% or 2.7% at 55 Miscellaneous pool
What kind of plan do you have? (Continued) Impact to the financial statements is based on the plan type: • Single-employer and Agent-employer Plans • 100% recognition • Cost-sharing multiple employer Plans • Recognize their proportionate share
Required Calculations–Net Pension Liability • (TotalPension Liability) – (Pension Plan’s Net Position) = Net Pension Liability • Determined as of no earlier than sponsoring entity’s prior fiscal year end (“measurement date”) • Approach based on a “benefits-earned” rather than a “funding-due” perspective
Determining Total Pension Liability (TPL-PNP=NPL) Definition • The portion of the actuarial present value of projected benefit payments that is attributed to past periods of employee service (what has been “earned”)
Determining Plan Net Position (TPL-PNP=NPL) • Measured at the measurement date • Same valuation methods used by the Plan
Determining Net Pension Liability (TPL-PNP=NPL) Total Pension Liability – Plan Net Position = Net Pension Liability
Pension Expense • Changes in Net Pension Liability • Incremental recognition of: • Differences between expected and actual • Economic or demographic factors • Investment earnings • Changes in assumptions
Pension-related deferred outflows/inflows • Unrecognized items not yet charged to pension expense • Contributions from the employer after measurement date but before reporting period
Note Disclosures • Description of the pension plan • Assumptions used to measure total pension liability • Detailed disclosures about the discount rate
Note Disclosures (Continued) • The pension Plan’s fiduciary net position • Can refer to Plan’s report • Plan’s basis of accounting • Brief description of changes in benefit terms and assumptions since prior measurement date 18
Note Disclosures (Continued) • Measurement date and date of the actuarial valuation • Employer’s policy for determining actual contributions to the plan
Note Disclosures (Continued) • If not separately disclosed in the financial statements, disclose aggregate: • Net pension liabilities • Deferred pension outflows/inflows • Pension expense for the period
Note Disclosures (Continued) • Components of deferred pension inflows and outflows, • Schedule of anticipated recognition of pension expense of deferred outflows/inflows for the next five years.
Note Disclosures (Continued) Additional disclosures for each Single-Employer or Agent Multiple-Employer Plan • Detail of changes in a schedule of changes in net pension liability
Note Disclosures (Continued) Additional disclosures for Cost-Sharing Multiple-Employer Plans • The employer’s proportion (amount and percentage) of the collective net pension liability
Note Disclosures (Continued) Additional disclosures for Cost-Sharing Multiple-Employer Plans (Continued) • The amounts of the net pension liability, deferred pension outflows and inflows, and pension expense recognized in the financial statements for each cost-sharing plan 24
Required Supplementary Information Ten-year schedule of changes in net pension liability (single-employer or agent multiple-employer plan only) Ten-year schedule of components of net pension liability and covered payroll Ten-year schedule of related contributions
Required Supplementary Information (Continued) • Notes to required schedules • Information about factors that significantly affect the identification of trends in the amounts reported • Significant methods and assumptions used in determining actuarially calculated employer contributions
Effective date and transition • Effective for financial statement periods beginning after June 15, 2014 • Earlier application is encouraged
What Should I Do Now??? • Know the overview of changes • GASB Pension Podcast Series (Dec 2012) • Familiarize yourself with your plan • Enlist the help of CalPERS • July 26, 2013 memo re: assistance • Begin educating stakeholders 28