GASB 45 Exposure Draft. Two New Exposure Drafts for OPEB

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1 GASB 45 Exposure Draft Presented by Kathleen Cost Solving Tomorrow s Benefit Plan Challenges...Today Two New Exposure Drafts for OPEB 1. Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans Exposure Draft Supersede GASB Nos. 43, 57, 25, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Exposure Draft Supersede GASB No. 45 Supersede GASB No. 57 (agent & agent multipleemployer) Amend portions of other GASB statements 2 Lumsden McCormick Exempt Conference 1

2 Two New Exposure Drafts for OPEB Also Superseded for Defined Contribution Plans: GASB No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans GASB No. 50, Pension Disclosures 3 GASB 45 Exposure Draft Summary Types of OPEB Plans Defined Benefit Amount of benefit provided by the employer is defined GASB No. 45 actuarial valuation required Defined Contribution Amount of employer contribution is defined 4 Lumsden McCormick Exempt Conference 2

3 Two New Exposure Drafts for OPEB AGENDA Why revise GASB 45? What is new in the Exposure Draft? When will standard be effective? What are the comments so far? 5 Why Revise GASB 45 6 Lumsden McCormick Exempt Conference 3

4 GASB 45 Exposure Draft Why a New Standard? Improve usefulness of financial statements for state and local governmental plans Require more useful information Increase transparency for users Improve decision-making Assess accountability Make comparisons among governments Obtain better understanding of financial picture 7 GASB 45 Exposure Draft Why a New Standard? Government s OPEB promise Provide better determination Provide better cost estimate 8 Lumsden McCormick Exempt Conference 4

5 What is New in the Exposure Draft 9 GASB 45 Exposure Draft Defined Contribution OPEB OPEB Expense = amount of employer contributions for the period, net of forfeitures OPEB Liability = difference between amounts in OPEB Expense and amounts paid by employer to the DC OPEB plan and benefit payments Notes should include description of plan and benefit provisions contribution rates and determination of contribution rates amounts attributed to employee service and forfeitures 10 Lumsden McCormick Exempt Conference 5

6 GASB 45 Exposure Draft Summary Measuring OPEB Costs Discount Rate Based on a projection of whether the employer s assets + projected contributions are expected to cover current plan members future benefits payments Bifurcated development of discount rate Use long-term expected rate of return to discount projected benefits expected to be provided by assets Use 20-year tax exempt, general obligation AA municipal bond index rate for projected benefits not expected to be provided by assets 11 GASB 45 Exposure Draft Summary Measuring OPEB Costs Discount Rate Funded OPEB Until assets no longer cover expected OPEB payments o Long-term expected yield on assets After assets no longer cover expected OPEB payments o High quality 20-year tax-exempt municipal bond yield (AA or higher) 12 Unfunded OPEB High quality 20-year tax-exempt municipal bond yield (AA or higher) Lumsden McCormick Exempt Conference 6

7 GASB 45 Exposure Draft Summary Measuring OPEB Costs Year AA Bond Yields Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Apr 2013 May 2013 Jun 2013 Jul 2013 Aug 2013 Sep 2013 Oct 2013 Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Sep 2014 Oct 2014 Yield 4% This index is based on an average of certain general obligation municipal bonds maturing in 20 years and having an average rating equivalent of Moody s Aa2 and Standard & Poor s AA. 13 Federal Reserve Economic Data Link: GASB 45 Exposure Draft Summary OPEB Trust OPEB Trust must meet all three: Contributions, as well as earnings on those contributions, are irrevocable Dedicated to providing OPEB to plan members Protected from creditors Not allowed in NYS 14 Lumsden McCormick Exempt Conference 7

8 GASB 45 Exposure Draft Summary Measuring OPEB Costs Actuarial Funding Method GASB 45 - Current Choose among 6 methods o Level percent of payroll, or o Level dollar amount Projected Unit Credit is most popular Exposure Draft Entry Age Normal Funding Method as a level percent of payroll 15 Actuarial Funding Method - Current 16 ARC Lumsden McCormick Exempt Conference 8

9 GASB 45 Exposure Draft Summary Measuring OPEB Costs OPEB Expense ARC eliminated Annual OPEB Cost eliminated OPEB Expense will be developed using shorter amortization periods Benefit Payments are a deferred outflow and not recognized in OPEB Expense 17 GASB 45 Exposure Draft Summary Measuring OPEB Costs Recognizing Changes in OPEB Expense GASB 45 - Current All changes usually recognized over 30 years 18 Lumsden McCormick Exempt Conference 9

10 GASB 45 Exposure Draft Summary Measuring OPEB Costs Recognizing Changes in OPEB Expense Exposure Draft Immediate recognition o Plan cost-sharing changes o Projected earnings, if funded 19 GASB 45 Exposure Draft Summary Measuring OPEB Costs Deferred recognition over average future working lifetime of active + inactive employees (i.e., zero) o Actuarial gains / losses o Assumption changes Deferred recognition over 5 years o Actual earnings on trust, if funded 20 Lumsden McCormick Exempt Conference 10

11 GASB 45 Exposure Draft Summary Recognize OPEB on Financial Statements Recognize Net OPEB Liability Funded OPEB OPEB liability less OPEB assets Unfunded OPEB the entire OPEB liability 21 GASB 45 Exposure Draft Summary Expanded Disclosures Note Disclosures Additional Items Description of OPEB plan Significant assumptions including discount rate and medical trend How interest rate determined Description of benefit changes Description of assumption changes 22 Lumsden McCormick Exempt Conference 11

12 GASB 45 Exposure Draft Summary Expanded Disclosures Note Disclosures Additional Items OPEB Liability and deferred recognition amounts Narrative about actuarial measurement process & changes Date of experience studies 23 GASB 45 Exposure Draft Summary Expanded Disclosures 24 Note Disclosures Sensitivity analysis 9 measurements +/- 1% in discount rate +/- 1% in medical trend OPEB liability beginning and ending balances Schedule of changes in OPEB liability such as Service Cost Benefit changes Investment earnings, if funded Asset information Lumsden McCormick Exempt Conference 12

13 GASB 45 Exposure Draft Summary Expanded Disclosures Required Supplementary Information (RSI) Provide 10 years of information Beginning / Ending balances of OPEB liability Sources of changes during each period of total OPEB liability and assets, if funded OPEB liability Covered employee payroll Ratio of OPEB liability as a % of payroll 25 GASB 45 Exposure Draft Summary Other Changes Frequency Triennial valuations no longer allowed Community-rated Medical Plans No community-rating exception to the implicit subsidy recognition Previously, if the medical plan was communityrated and retirees contributed 100% of the premium, the GASB 45 liability = $0 26 Lumsden McCormick Exempt Conference 13

14 When will the New GASB Standard be Effective 27 GASB 45 Exposure Draft Summary Effective for fiscal years beginning after December 15, 2016 Example, Fiscal Year Beginning July 1, 2017 Measurement date is plan s fiscal year end Example, Measurement Date June 30, Lumsden McCormick Exempt Conference 14

15 What have the ED Comments been so far 29 GASB 45 Exposure Draft - Comments Should continue to allow Triennial valuations, otherwise Cost to prepare the actuarial valuation and audit are significant Some entities will stop preparing GAAP statements 30 Lumsden McCormick Exempt Conference 15

16 GASB 45 Exposure Draft - Comments Too Much, Too Soon GASB 45 is less than 10 years old 2,000 pages of ED this year in addition to the 2 new pension standards and implementation guides ED are complex and difficult to follow Huge leap in complexity from GASB 45 to the ED GASB 67 / 68 implementation difficult enough Will make it much more difficult to timely prepare financial statements (actuarial + audit time) Recommend delay and stagger effective dates 31 GASB 45 Exposure Draft - Comments OPEB are not the same as Pension Benefits Pensions have legal plan document, laws and regulations and OPEB have substantive plan Pensions are guaranteed but OPEB are not OPEB do not accrue like pensions OPEB liability depends on the retirees health, changing technology, healthcare marketplace, state / federal laws OPEB benefits include assumptions about retiree behavior 32 Lumsden McCormick Exempt Conference 16

17 GASB 45 Exposure Draft - Comments OPEB are not the same as Pension Benefits OPEB are not truly defined: Premiums / Deductibles / Copays change annually Future cost trends difficult to predict Marketplace / healthcare environment changing OPEB benefits are volatile year to year but pension benefits can be calculated Should only make those entities that have a statutorily guaranteed benefit put the Net OPEB Obligation on the balance sheet 33 GASB 45 Exposure Draft - Comments OPEB are not the same as Pension Benefits OPEB are not a career long promise No vesting requirements No funding requirements 34 Lumsden McCormick Exempt Conference 17

18 GASB 45 Exposure Draft - Comments Sensitivity Disclosures 9 Different Measures Overkill Redundant Additional cost without additional increase in benefit or better information Burdensome Hypothetical and most likely very confusing to readers 35 GASB 45 Exposure Draft - Comments Discount Rate 20-year bonds vary daily Variety of possible bond indices could be used leading to lack of comparability Changes in municipal bond rates would result in significant changes to OPEB liability even in the absence of changes to the underlying plan Should simplify for the alternative measurement method 36 Lumsden McCormick Exempt Conference 18

19 GASB 45 Exposure Draft - Comments EAN Method Should allow Projected Unit Credit (PUC) Level % of Pay not relevant since OPEB rarely based on salary; at least allow level dollar EAN is difficult to explain and a step in the direction away from clarity and ease of understanding the statements EAN accrued liability & PUC accrued liability are the same and that is what matters, so allow PUC 37 GASB 45 Exposure Draft - Comments EAN Method Other assumptions are more impactful than funding method, so allow use of different methods PUC has worked for FASB for 20+ years At least allow choice of EAN and PUC In New York: 15% use EAN and 71% use PUC [Deputy Comptroller, Division of Local Govt and School Accountability] 38 Lumsden McCormick Exempt Conference 19

20 GASB 45 Exposure Draft - Comments Actuarial Assumptions Some assumption changes may only apply to active employees and recognizing these change over working lifetime of actives and inactives seems inappropriate 39 GASB 45 Exposure Draft - Comments Plan Change Recognition Recognizing plan changes immediately reduces ability to compare financial statement where some employers have a 1 year spike and other do not Should allow recognition over working lifetime (or future lifetime) 40 Lumsden McCormick Exempt Conference 20

21 GASB 45 Exposure Draft - Comments Consequences of Increased Volatility Confusing Have seen increased volatility from new Pension standards and also expect additional volatility from OPEB Exposure Draft Results will be too volatile to be used as an effective benchmark for employer performance Undermines confidence in accuracy of statements What is the real cost of the plan: the GASB Expense or an actuarially determined funding amount, if any 41 GASB 45 Exposure Draft - Comments Consequences of Increased Volatility Misleading portrayal of the liability Difficult to explain to taxpayers that the govt appears to be in the red when it is not Will not improve local fiscal management Lead to confusion, lack of trust by the public Lead to short-sighted decision-making Should allow longer time for amortization 42 Lumsden McCormick Exempt Conference 21

22 GASB 45 Exposure Draft - Comments Other Bond Ratings will suffer Has significant effect on the balance sheet that does not represent the true liability Eliminating ARC is a bad idea 10-year schedule of contributions is irrelevant if the OPEB is not funded 43 GASB 45 Exposure Draft - Comments Other Increase volatility of OPEB liabilities Reduce ability to timely complete financial statements Experience from implementing new pension standards: significant time needed for actuarial, financial reporting and auditing Add significant additional costs Will most likely encourage a further reduction in the number of plans providing OPEB 44 Lumsden McCormick Exempt Conference 22

23 GASB 45 Exposure Draft - Comments Other Accounting is not supposed to be used to cause change but should only be a tool to understand the current world around us [Dave Yost, Ohio State auditor] 45 Implementation of GASB 67 - Financial Reporting for Pension Plans GASB 68 - Accounting and Financial Reporting for Pensions Presented by Sarah Dam Solving Tomorrow s Benefit Plan Challenges...Today Lumsden McCormick Exempt Conference 23

24 Background Previous standards for public sector pension plans adopted in 1994 GASB 25: accounting for the plan by the plan GASB 27: accounting for the plan by the sponsor These previous standards had a strong link between funding and accounting Requirements under GASB 67 and 68 do not impact plan funding directly but result in delinking funding and accounting 47 Background Objective is to improve financial reporting by state and local governmental pension plans Greater transparency, consistency and comparability of pension information reported by state and local governments and pension plans Closer to GAAP accounting More volatile results Issued June Lumsden McCormick Exempt Conference 24

25 Summary of GASB 67 Financial Reporting for Pension Plans Effective for financial statements for fiscal years beginning after June 15, 2013 Example For Calendar fiscal years first effective for 12/31/2014 disclosures Reporting date is end of plan s fiscal year Replaces requirements of GASB 25 Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans GASB 50 Pension Disclosures 49 Summary of GASB 67 Financial Reporting for Pension Plans Applicable to pension plans that issue their own financial reports, as well as plans that are reported as a fiduciary fund by a government If Plan issues stand-alone GAAP basis financial statement GASB 67 implemented in plan s 2014 financial statement If Employer s financial statement presents the plan as a fiduciary fund then include any GAS 67 disclosures essential to a fair presentation along with GASB 27 compliance 50 Lumsden McCormick Exempt Conference 25

26 Summary of GASB 67 Financial Reporting for Pension Plans If plan does not issue stand alone financial statement If Employer s financial statement presents the plan as a fiduciary fund then include all GAS 67 disclosures along with GASB 27 compliance 51 Summary of GASB 67 Financial Reporting for Pension Plans Scope limited to pension plans administered through trusts and meet following criteria: Contributions are irrevocable Plan assets dedicated to providing pension benefits to plan members Plan assets legally protected from creditors 52 Lumsden McCormick Exempt Conference 26

27 Summary of GASB 67 Financial Reporting for Pension Plans Applies primarily to defined benefit pension plans, both single-employer and multiple-employer plans Types of multiple-employer plans Agent Assets are pooled for investment purposes, however separate accounts are maintained for each individual employer. Each participating employer s share of pooled assets are legally available to pay the benefits of only that employer s retirees. 53 Summary of GASB 67 Financial Reporting for Pension Plans Cost sharing Participating employers pool assets and obligations to provide benefits. Plan assets can be used to pay benefits of retirees of any participating employer. New York State Employees Retirement System (NYSERS) New York State Teachers Retirement System(NYSTRS) 54 Lumsden McCormick Exempt Conference 27

28 Summary of GASB 67 Financial Reporting for Pension Plans Two financial statements presented Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Notes to Financial Statements Required Supplementary Information 55 Summary of GASB 67 Financial Reporting for Pension Plans Statement of Fiduciary Net Position Presented as of the end of the plan s reporting period Assets (Cash and equivalents, Contribution receivables, Investments, Other assets used in pension plan operations) Plus Deferred outflow of resources Minus Liabilities (benefit payments due to plan members) 56 Deferred inflow of resources Lumsden McCormick Exempt Conference 28

29 Summary of GASB 67 Financial Reporting for Pension Plans Statement of Changes in Fiduciary Net Position Presented for the plan s reporting period Additions such as contributions and net investment income Deductions such as benefit payments and administrative expenses Net increase (decrease) in Fiduciary Net Position equal to difference between Additions and Deductions 57 Summary of GASB 67 Financial Reporting for Pension Plans Notes to Financial Statements Descriptive Information Type of benefits provided Classes of plan members covered Composition of pension plan s board 58 Lumsden McCormick Exempt Conference 29

30 Summary of GASB 67 Financial Reporting for Pension Plans Notes to Financial Statements Pension Plan Investments Information Investment Policy Fair value determination description Investments equal or greater than 5% of plan s fiduciary net position Annual money weighted rate of return Contributions, Reserves, Allocated Insurance Contracts 59 Summary of GASB 67 Financial Reporting for Pension Plans Notes to Financial Statements Additional Disclosures Agent plans will not make these additional disclosures Aggregated information for all employers obscures information about individual employer, yet not practical to make disclosures for each one 60 Lumsden McCormick Exempt Conference 30

31 Summary of GASB 67 Financial Reporting for Pension Plans Notes to Financial Statements Additional Disclosures Single Employer and Cost Sharing Pension Plans Total Pension Liability Fiduciary Net Position Net Pension Liability Fiduciary Net Position as percentage of Total Pension Liability 61 Summary of GASB 67 Financial Reporting for Pension Plans Notes to Financial Statements Additional Disclosures Significant Assumptions used to measure Total Pension Liability Inflation Salary Changes Discount Rate Mortality 62 Lumsden McCormick Exempt Conference 31

32 Summary of GASB 67 Financial Reporting for Pension Plans Supplementary Information All defined benefit plans will present a 10 year * schedule containing the annual money weighted rate of return *At transition, present for as many years as available 63 Summary of GASB 67 Financial Reporting for Pension Plans Supplementary Information (cont d) Single Employer and Cost Sharing Pension Plans Schedules following the notes containing the following information for the past 10 years*: o Beginning and Ending balances of the Total Pension Liability, Plans Net Position, and Net Pension Liability. Changes in these amounts during the year presented by cause (example: Service Cost for Total Pension Liability, Contributions for Plans Net Position) *At transition, present for as many years as available 64 Lumsden McCormick Exempt Conference 32

33 Summary of GASB 67 Financial Reporting for Pension Plans Supplementary Information (cont d) Single Employer and Cost Sharing Pension Plans Schedules following the notes containing the following information for the past 10 years*: Ratio of Plan Net Position divided by Total Pension Liability Payroll amount for current employees in the plan (covered employee payroll) and a ratio of the Net Pension Liability divided by covered employee payroll *At transition, present for as many years as available 65 Summary of GASB 67 Financial Reporting for Pension Plans Supplementary Information (cont d) Schedules following the notes containing the following information for the past 10 years*: If contributions to the plan are actuarially determined the difference between the actual and actuarially determined contributions Ratio of actual contributions divided by covered employee payroll *At transition, present information for contributions for all 10 years, if applicable. 66 Lumsden McCormick Exempt Conference 33

34 Summary of GASB 67 Financial Reporting for Pension Plans Defined contribution plan disclosures Less extensive Classes of plan members covered Number of plan members Number of participating employers and non employer contributing entities Authority under which plan is established and may be amended 67 Measurement of Total Pension Liability Determine actuarial present value of projected benefit payments Projected benefit payments should reflect the terms of the plan and legal agreements existing at the plan s fiscal year end Effects of future salary increases (if benefit is pay related), service credits and projected automatic post employment benefit changes (such as COLAs) should be reflected 68 Lumsden McCormick Exempt Conference 34

35 Measurement of Total Pension Liability Discount projected benefit payments based on single equivalent discount rate Allocate actuarial present value of projected benefit payments to periods of plan member service based on the Entry Age Normal cost method with level percentage of pay 69 Measurement of Total Pension Liability Determine Single Equivalent Discount Rate which reflects: 1. Long term expected return on pension plan investments to extent projected fiduciary net position is expected to be sufficient to pay benefits and pension plan assets are expected to be invested using a strategy to achieve that return, and 2. A tax-exempt, high quality municipal bond rate* to the extent the conditions for the use of the long term expected rate of return are not met (i.e. the crossover point where assets are projected to not be sufficient to cover projected benefit payments) 70 * Yield or index for 20 year tax exempt general obligation bonds with an average rating of AA/Aa or higher Lumsden McCormick Exempt Conference 35

36 Measurement of Total Pension Liability Need funding policy to determine when plan assets will be exhausted Many plans contribute normal cost plus closed amortization payments Should have discount rate equal to expected long term return on assets Many plans contribute normal cost plus open amortization payments Likely have lower blended discount rate 71 Liability more volatile as 20 year municipal bond rate may vary. Measurement of Total Pension Liability Actuarial valuations of Total Pension Liability are required to be performed at least every two years, more frequent valuations encouraged If valuation not performed at plan s fiscal year end, then standard roll forward techniques from a prior valuation (not more than 24 months prior to the plan s fiscal year end) can be used 72 Lumsden McCormick Exempt Conference 36

37 Summary of GASB 68 Accounting and Financial Reporting for Pensions Effective for employer fiscal years beginning after June 15, 2014 Example - For Calendar fiscal years first effective with 2015 expense and 12/31/2015 FS Replaces requirements of GASB 27 Accounting for Pensions by State and Local Governmental Employers (and GASB 50) 73 Summary of GASB 68 Accounting and Financial Reporting for Pensions Scope limited to pension provided through trusts (same as GASB 67) Applies to employers and non employer contributing entities that have a legal obligation to make contributions directly to a pension plan 74 Lumsden McCormick Exempt Conference 37

38 Summary of GASB 68 Accounting and Financial Reporting for Pensions Establishes standards for measuring and recognizing: Liabilities Deferred outflow of resources Deferred inflow of resources Expense/expenditures Notes to Financial Statements Required Supplementary Information 75 Summary of GASB 68 Accounting and Financial Reporting for Pensions Liability (Net Pension Liability (NPL)) Total Pension Liability less Plan Net Position as of measurement date Fully recognized in accrual basis financial statements Changes in the Liability Most recognized as expense in the period of the change Others recognized as deferred outflows/inflows of resources with expense recognized over defined future periods 76 Lumsden McCormick Exempt Conference 38

39 Summary of GASB 68 Accounting and Financial Reporting for Pensions Employer contributions subsequent to the measurement date of NPL are required to be reported as deferred outflows 77 Summary of GASB 68 Accounting and Financial Reporting for Pensions Measurement date is any time within a year of the employer s fiscal year end (i.e. no earlier than end of prior fiscal year) Example For Calendar fiscal years any date between 12/31/2014 and 12/31/2015 Standard roll forward procedures used to update Total Pension Liability if actuarial valuation not performed as of the measurement date Actuarial valuation date for Total Pension Liability is no more than 30 months prior to fiscal year end 78 Actuarial valuation required at least every two years Lumsden McCormick Exempt Conference 39

40 Summary of GASB 68 Accounting and Financial Reporting for Pensions Single/agent employers recognize 100% of the NPL, Deferred outflows/inflows and Expense Cost sharing employers recognize proportionate share of plan NPL, Deferred outflows/inflows and Expense Allocation method based on projected long term contributions to the plan is encouraged, however other methods, depending on relevant factors are acceptable. 79 Summary of GASB 68 Accounting and Financial Reporting for Pensions Calculation of Pension Expense Recognize for the current period certain changes to the TPL Changes not fully recognized are tracked in deferred inflows/outflows and recognized in expense over time 80 Lumsden McCormick Exempt Conference 40

41 Summary of GASB 68 Accounting and Financial Reporting for Pensions Basic Formula for Pension Expense: Service cost + Interest on TPL + Current period benefit terms changes Member contributions Expected earnings on plan investments + Administrative expenses + Recognition of deferred outflows Recognition of deferred inflows 81 Summary of GASB 68 Accounting and Financial Reporting for Pensions Recognition of deferred outflows/inflows Differences between actual and expected return on assets recognized over closed 5 year period Differences between actual and expected experience and the impact of any assumption changes recognized over closed period equal to the remaining service life of all active and inactive Note that remaining service life for inactive participants is zero and is included in the determination 82 Lumsden McCormick Exempt Conference 41

42 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers Descriptive Information Name of pension plan, identify public employee retirement system or other entity, identify as single employer, agent or cost sharing Brief description of benefit terms classes of employees covered, type of benefits provided including any post employment increases (COLAs), if closed to new entrants 83 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers Number of employees covered including inactive receiving and not receiving and active employees Brief description of contribution requirements Reference if pension plan issues stand alone FS and where to get report 84 Lumsden McCormick Exempt Conference 42

43 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers Information about the NPL Significant assumptions including inflation, salary changes and postemployment benefit changes (COLAs) o Mortality assumption should include detail such as published table reference. o Dates of experience studies 85 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers Information about the NPL Discount rate detail o Change since last year o Assumptions about projected cash flow in an out of plan o Long term rate of return on pension plan investments and how determined 86 Lumsden McCormick Exempt Conference 43

44 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers o Municipal bond rate used and source of data o Period of projected benefit payments for which discounted at long term expected return o Assumed asset allocation of pension plan and long term expected return for asset classes 87 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements Single & Agent Employers Changes in the NPL NPL at beginning of year Change in NPL during the year presented by cause(service cost, benefit changes, investment earnings, etc.) Ending NPL Measure of NPL at discount rate +/- 1% 88 Lumsden McCormick Exempt Conference 44

45 Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers Balances of deferred outflows of resources and deferred inflow of resources presented by source Net amount of deferred inflows and outflows that will be recognized as pension expense for each of the next five years and in the aggregate thereafter Amount of deferred outflows that will reduce the net pension liability for each of the next five years and in aggregate thereafter 89 For cost sharing plans, these amounts are the employer s proportionate share Summary of GASB 68 Accounting and Financial Reporting for Pensions Notes to Financial Statements All Employers Pension Plan s Fiduciary Net Position All information as required by the pension plan s financial statement with regard to the pension plan assets should be disclosed Or if this information is available on the internet in another report reference can be made to that source, along with other disclosures about any significant differences 90 Lumsden McCormick Exempt Conference 45

46 Summary of GASB 68 Accounting and Financial Reporting for Pensions Required Supplementary Information Reported for each of the most recent 10 years * Total Pension Liability, Pension Plan s Fiduciary Net Position, Net Pension Liability, Ratio of Plan s Net Position to Total Pension Liability Covered Payroll for current employees in plan, Ratio of Net Pension Liability to Covered Payroll *At transition, present for as many years as available 91 Summary of GASB 68 Accounting and Financial Reporting for Pensions Required Supplementary Information Reported for each of the most recent 10 years* Employer s Actuarially Determined (Statutory or Contractual for Cost Sharing Employers) Contribution Employer s Actual Contribution and difference from above amount Ratio of Actual Contribution to Covered Payroll *At transition, present for as many years as available 92 Lumsden McCormick Exempt Conference 46

47 Summary of GASB 68 Accounting and Financial Reporting for Pensions Required Supplementary Information Reported for each of the most recent 10 years* Single or Agent Employers Only Total Beginning and Ending balances of Total Pension Liability, Plan s Fiduciary Net Position, Net Pension Liability Changes in theses amount during the year presented by cause *At transition, present for as many years as available 93 Harbridge Consulting Group, a BPAS Company Sarah Dam, FSA, EA Senior Vice President (315) sdam@bpas.com Kathleen Cost, ASA, MAAA Senior Consultant (585) kcost@bpas.com OUR LOCATIONS BPAS - Utica 6 Rhoads Dr Suite 7 Utica, NY BPAS - Houston 820 Gessner Suite 1250 Houston, TX BPAS - Syracuse One Lincoln Center Twelfth Floor Syracuse, NY BPAS - Manhattan 355 Lexington Ave. New York, NY BPAS - Pittsburgh 300 Mt. Lebanon Blvd Suite 314 Pittsburgh, PA BPAS - New Jersey 120 Eagle Rock Ave. East Hanover, NJ BPAS Philadelphia 3501 Masons Mill Rd Suite 505 Huntingdon Valley, PA BPAS San Juan 1569 Alda Street Doral Building, Ste 303 San Juan, PR BPAS Rochester 1387 Fairport Rd Building 700, Ste 720 Fairport, NY Benefit Plans Administrative Services, Inc. (BPAS) Benefit Plans Administrative Services, Inc. (BPAS), which includes Harbridge Consulting Group and Hand Benefits & Trust, is a national provider of retirement plan administration, actuarial, consulting, collective investment fund administration and VEBA / HRA services to a diverse array of clients spanning the United States and Puerto Rico. We service over 3,600 retirement plans and 350,000 plan participants in total, through partnerships with a wide array of financial intermediaries; and hold $16 billion in assets under custody. BPAS service offerings also include automatic rollover and post termination loan administration services. With nine offices and 240 employees, BPAS has the depth of professional and technology resources to deliver value-added services to all employee benefit stakeholders. At BPAS, we are committed to Solving Tomorrow s Employee Benefit Challenges Today. 94 Lumsden McCormick Exempt Conference 47