GASB Revised Pension Standards:

Transcription

1 GASB Revised Pension Standards: What Arizona governments need to know DONNA MILLER, PROFESSIONAL PRACTICE DIRECTOR ARIZONA OFFICE OF THE AUDITOR GENERAL NANCY BENNETT, CFO, ARIZONA STATE RETIREMENT SYSTEM MAY 19, 2015

2 At the end of this session, you will be able to: Understand and implement GASB 68 for Arizona government employers by being able to Know where to get Arizona pension plan amounts and disclosure information needed Make required entries to properly report pension amounts Complete required note disclosures and required supplementary information

3 Pension Reporting revisions Pension Plans GASB Statement 67 Financial statements unchanged Note disclosures and RSI changes Employers GASB Statements 68 & 71 Pension amounts reported in F/S s More robust note disclosures and RSI changes

4 Employer Pension amounts reported Net pension liability (NPL) = Total pension liability plan assets Pension expense Deferred inflows of resources Deferred outflows of resources

5 Arizona s government pension plans Arizona State Retirement System (ASRS) Public Safety Personnel Retirement System (PSPRS) Correction Officer s Retirement Plan (CORP) Elected Officials Retirement Plan (EORP) City of Phoenix Employees Retirement System (COPERS) Tucson Supplemental Retirement System (TSRS)

6 NPL by plan June 30, 2014 ASRS PSPRS CORP EORP COPERS TSRS $14.80 Billion % funded $ 6.30 Billion (GASB 67/68 amount not available) $ 1.14 Billion (GASB 67/68 amount not available) $ 0.67 Billion % funded $ 1.39 Billion $ 0.31 Billion Total Arizona NPL: $24.6 Billion

7 GASB s main revisions NPL Include certain plan terms like COLA s Discount rate must blend muni bond rate if assets aren t sufficient Actuarial attribution method must be entryage cost Plan assets cannot be smoothed, use fiduciary net position

8 Defined benefit plan types

9 Defined benefit plan types Cost-sharing Proportionate share of total liability Rational basis like contributions Fiduciary net position pooled and shared for benefits/expenses Agent multipleemployer Each employer has separate account Distinct liability Distinct fiduciary net position

10 Arizona s government pension plans Cost-sharing multiple-employer plans: ASRS EORP CORP-AOC Agent multiple-employer plans PSPRS CORP

11 Pension measurement date no earlier than employer s prior fiscal year (12 months before) FY 2014 FY June 30, 2014 Pension amounts 6/30/2014 Measurement June 30, 2015 Employer Report Date 6/30/2015 Report

12 Employer implementation Pension plans providing employers necessary information Coordinating with the Auditor General s Office Auditor General s Office providing reporting guidelines for all disclosures

13 Plan Provided Information Cost-Sharing Plans ASRS, EORP, CORP-AOC Schedule of employer allocations Schedule of pension amounts by employer Audit report on schedules by plan s external auditors

14 ASRS APPROACH Collective Net Pension Liability Calculation Valuation Date June 30, 2013 Roll forward procedures Measurement Date June 30, 2014 Deferred contributions Reporting Date June 30, mos prior to current fye 12 months prior to current fye Roll forward procedures effects of changes in discount rate cash flows and interest earned legislative changes assumption changes experience study changes Measurement Date possible future permanent benefit increases all other assumptions same as funding assumptions

15 ASRS RECOMMENDED Employer Proportionate Share Calculation Based on total contributions paid during fy plan & system contributions alternate contribution rate contributions Most closely reflects actual proportionate share contributions paid and covered payroll are essentially the same Easy to audit Minimizes possibility of deferred item of differences between employer contributions paid and proportionate share of contributions required to be paid

16 GASB 68 Information Provided to Employers by ASRS Schedule of Pension Amounts by Employer* (as of June 30, 2014) net pension liability deferred inflows/outflows of resources pension expense will include NPL as of July 1, 2013 Schedule of Employer Allocations* (as of June 30, 2013 & 2014) employer contributions and proportionate share Schedules to be issued Spring 2015 will be audited by ASRS external auditors *In accordance with AICPA SLGEP issued whitepaper pension series

17 GASB 68 Information Provided to Employers by ASRS Prior period adjustment employers add contributions paid in fiscal year Note disclosures to come from Notes to schedules ASRS June 30, 2014 CAFR financial statement reporting guidelines from the Auditor General AICPA recommended schedules RSI to come from ASRS June 30, 2014 CAFR RSI Section financial statement reporting guidelines from the Auditor General AICPA recommended schedules

18 Example Schedule of Pension Amounts by Employer ASRS Information You Can Expect SOURCE: AICPA SLGEP Pension Whitepaper Series, Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans: Issues Related to Information for Employer Reporting

19 Example Schedule of Employer Allocations ASRS Information You Can Expect SOURCE: AICPA SLGEP Pension Whitepaper Series, Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans: Issues Related to Information for Employer Reporting

20 GASB 68 Information Provided to Employers by ASRS Schedules will be posted on our website We will notify employers when schedules are on the website

21 ACCOUNTING VS. FUNDING June 30, 2014 Item GASB 68 Methodology ASRS Funding Methodology NPL/AAL $14,796,602,153 $9,801,329,918 Funded Ratio 69.49% 76.3% Actuarial Method Entry Age Cost Projected Unit Credit Assets Market Value Actuarial Value PBI Yes No Discount Rate 8% 8%

22 ASRS top 10 participating employers 6/30/14 Government % of ASRS membership 1) State of Arizona (without universities) 12.75% 2) Maricopa County 4.34% 3) Mesa Unified School District #4 4.05% 4) University of ASRS Arizona Information You Can Expect 3.31% 5) Maricopa Community College 3.04% 6) Tucson Unified School District 3.02% 7) Arizona State University 2.53% 8) Pima County 2.37% 9) Gilbert Unified School District # % 10) Chandler Unified School District # % All others 60.35% %

23 Agent Plans (PSPRS and CORP) Plan provided information Actuarial valuation report for each employer Actuarial certification letter to employer management Attestation report on census data (retired and inactive members) by plan s external auditors Schedule of changes in fiduciary net position for each employer Audit report on each schedule by plan s external auditor

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25 Employer implementation Remember Employer and employer auditor responsibilities Fair presentation of financial statements Sufficient evidence and understanding of reported information Auditors verify sufficient evidence and reported amounts and information

26 Employer Pension amounts reported Net pension liability (NPL) Pension expense Deferred inflows of resources Deferred outflows of resources

27 Funds and activities effected Long-term liability = full accrual Governmental activities on Government-wide statements Business-type activities/enterprise Funds Internal Service Funds

28 Governmental funds What about the General and other governmental funds? NO CHANGE Employer contributions paid during the year remain expenditures New reconciling items between governmental funds and governmental activities

29 Line items effected Government-wide statements: deferred inflows/outflows noncurrent liabilities expense activities, like general government and public safety

30 Note disclosures Plan descriptions, terms, assumptions, changes Employer s % of NPL Deferred inflows/outflows balances Discount rate sensitivity to NPL +/- 1%

31 Required supplementary information 10-year schedules: Components of NPL Contributions and related ratios Transition can present only those years available

32 Auditor General Provided Information All plan types DRAFT reporting guideline (notes and RSI) Counties Community college districts School districts Sample journal entries (cost-sharing plan) Available at

33 All Plans

34 All Plans

35 Cost-Sharing Plans

36 Agent Plans

37 Agent Plans

38 All Plans Cost-sharing plans only

39 All Plans

40 All Plans

41 All Plans

42 All Plans using only Long-term Expected Rate of Return (LTERR)

43 All Plans using LTERR and Municipal Bond Rate

44 All Plans

45 ASRS Sensitivity disclosure 6/30/14

46 Cost-Sharing Plans RSI

47 Agent Plans RSI

48 All Plans RSI

49 What employer pension amounts are reported? Net pension liability (NPL) (=Total pension liability plan assets) Pension expense Deferred inflows of resources Deferred outflows of resources

50 Which funds and activities are effected? Governmental activities government- wide statements Business-type activities government-wide statements and Enterprise funds Internal service funds

51 Which line items are effected? Government-wide statements: Noncurrent liabilities Deferred inflows/outflows of resources Expense activities like general government or public safety

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53 Prior Period Adjustment Note Governmental Activities Beginning net position as previously reported at June, 30, 2014 $80,000,000 Prior period adjustment implementation of GASB 68: Net pension liability Deferred outflows contributions subsequent to the measurement date Total prior period adjustment Net position as restated, July 1, 2014 (45,850,000) 3,000,000 (42,850,000) $37,150,000

54 Prior Period Adjustment J/E Debit Credit Net position, prior year July 1, 2014 Deferred outflow of resources related to pensions contributions subsequent to the measurement date $42,850,000 3,000,000 Net pension liability $45,850,000

55 Current Year Net Pension Liability, Pension Expense, and Deferred Amounts Prior year net pension liability and deferred outflows for subsequent contributions (reversal) Pension expense Deferred outflow of resources related to pension differences in experience Deferred outflow of resources related to pensions changes of assumptions Deferred outflow of resources related to pensions changes in proportion Deferred inflow of resources related to pensions net difference between projected and actual investment earnings Net pension liability current year Debit $42,850,000 1,910, ,000 1,400,000 90,000 Credit 1,600,000 45,000,000

56 Current Period Contributions Debit Credit Deferred outflow of resources related to pensions contributions subsequent to the measurement date $3,300,000 Employee-related expenditures $3,300,000

57 Note Disclosure: Deferred Inflows/Outflows Related to Pensions Difference between expected and actual experience Net difference between projected and actual investment earnings on pension plan investments Changes of assumptions Changes in proportion and differences between contributions and proportionate share of contributions Contributions subsequent to the measurement date Totals Deferred Outflows of Resources $ 350,000 1,400,000 Deferred Inflows of Resources $1,600,000 90,000 3,300,000 $5,140,000 $1,600,000

58 Employer implementation Employer and employer auditor responsibilities Determine whether the auditor and actuary have the necessary competence and independence Evaluate plan auditor s reports and schedules For cost-sharing plans, recalculate proportionate share the employer contribution amount For agent plans, determine the accuracy of the important active members census data used by plan s actuary

59 Questions or Comments? Websites: ASRS: Arizona Auditor General: Thank you for your attention!