GASB 68. Pension Reporting. part 1. An Overview for Employers

Transcription

1 GASB 68 part 1 Pension Reporting An Overview for Employers

2 Purpose/Agenda The purpose of this overview is to review the new GASB 68 Reporting Requirements and their potential impact on employers reporting to KRS Implementation/Impact Key Implementation Issues Footnote Disclosures GASB Guidance

3 Why is this important for you?

4 To understand how the new standard may impact your organization and provide you with some useful information

5 To begin working with your external auditor so that you can implement the new standard in your fiscal 2015 financial statements

6 To understand what resources KRS will provide

7 and to understand what resources are directly available from GASB

8 Who will be impacted by this new standard?

9 All employers participating in KRS, except those employers who report on the cash basis of accounting or report on OCBOA

10 New Rules

11 Employers are required to recognize their proportionate share of the net pension liability (equivalent to the unfunded liability) in their financial statements

12 Employers will have to add detailed disclosures to their financial statements in the footnotes to the Financial Statements section

13 The new rules become effective for fiscal years beginning after June 15, Or in other words, in your June 30, 2015 financial statements

14 Implementation Issues

15 Employers determine the measurement date; for most of the agencies reporting to KRS, it will be June 30th

16 The actuaries of KRS will be calculating the change in its net pension liability (unfunded liability)

17 KRS will provide the proportionate share information to employers in a timeframe that meets the employer s financial statement audit deadlines

18 We will post the proportionate share information for employers on our website ( under the GASB Changes icon

19 Proportionate share is based upon employer contributions as a percent of total contributions: Employer Contribution $24,000 =2.4% $28,000 =2.8% Total $1,000,000 Contributions by plan information will be provided by KRS

20 Implementation Issues Employer Pension Liability

21 Employers will apply their proportionate share of KRS actuarial values to determine their financial reporting components

22 An important element in determining the employer financial reporting requirements will be to track the components that caused the change in KRS net pension liability:

23 Differences between actual experience and expected experience Changes in assumptions used in calculations Difference between projected and actual investment earnings Change in the employer s proportionate share of contributions Employer contributions subsequent to the measurement date Difference between actual contributions and proportionate share

24 Example: Employer Pension Liability ASSUMPTIONS How long current active members will work What the average salary increases for this population will be When the current active population will retire How long all active and retired members will live Difference between actual experience and expected experience $1,000,000 Change in Assumptions $0 Difference between projected and actual investment earnings $4,000,000 Note: numbers used for illustrative purposes throughout

25 Example: Employer Pension Liability AMMORATIZATION Change in employers proportionate share Calculated by each employer Employer contributions subsequent to the measurement date Difference between actual contributions and proportionate share Calculated by each employer Precluded by using current year contributions to determine proportionate share Note: numbers used for illustrative purposes throughout

26 Example: Employer Pension Liability Employer s Proportionate Share of Net Pension Liability Beginning of Year Employer s Proportionate Share of Net Pension Liability End of Year Net Reduction in Net Pension Liability $23,000,000 $16,000,000 $7,000,000 Note: numbers used for illustrative purposes throughout

27 Employer Pension Liability Change in Net Pension Liability $7,000,000 Current Year Actuarial Gains and Losses Current Year Value of Change in Actuarial Assumptions Difference between expected and actual investment returns Change in NPL subject to immediate recognition as Pension Expense = $2,000,000 ($1,000,000) $0 ($4,000,000) $2,000,000

28 Employer Pension Liability Current Year Actuarial Gains and Losses Current Year Value of Change in Assumptions Total actuarial experience subject to service life amortization divided by Average Expected Remaining Service Lives Annual amount recognized each year in pension expense $1,000,000 $0 $1,000, years $100,000 = $100,000

29 Employer Pension Liability Difference between Expected and Actual Investment Returns divided by 5 years Annual amount recognized each year in pension expense $4,000,000 5 Years $800,000 = $800,000

30 Employer Pension Liability Change in NPL subject to immediate recognition Annual amount of service life amortization Annual amount of amortized investment returns $2,000,000 + $100,000 + $800,000 Total Pension Expense $2,900,000 Total $2,900,000

31 Actuarial Valuation/Pension Expense Example Statements Total Pension Liability 12/31/ /31/2011 Change Service Cost $2,000,000 $2,100,000 ($100,000) Interest on NPL 6,000,000 5,800, ,000 Changes in Benefit Terms (3,000,000) $0 (3,000,000) Diff Expected/Actual Experience (1,000,000) (200,000) (1,200,000) Changes in Benefit Assumptions Payments (5,000,000) 4,500,000 (500,000) Refunds of Member (200,000) (300,000) 100,000 Net Change Accts in PL ($1,200,000) $3,300,000 ($4,500,000)

32 Actuarial Valuation/Pension Expense Example Statements Total Pension Liability TPL Beginning 83,300,000 80,000,000 3,300,000 TPL Ending $82,100,000 $83,300,000 ($1,200,000)

33 Total Pension Liability Ending Plan Fiduciary Net Position (FNP): Member/Employer Contribution Actuarial/Pension Expense Example Statements 12/31/ /31/2011 Change $82,100,000 $83,300,000 ($1,200,000) $2,400,000 $2,450,000 ($50,000) Net Investment Income 8,700, ,000 8,400,000 Benefit Pymts/Refunds (5,200,000) (4,800,000) (400,000) Noninvestment Admin Expenses Net Change in FNP Accounts 110, ,000 10,000 $6,010,000 ($1,950,000) $7,960,000 FNP Beginning 61,050,000 63,000,000 (1,950,000) FNP Ending $67,060,000 $61,050,000 $6,010,000 Employer Net Pension Liability $15,040,000 $22,250,000 ($7,210,000)

34 Employer Example Statement Balance Sheet 12/31/2012 Cash $1,000,000 Receivables 1,200,000 Investments 10,000,000 Deferred Outflows 4,100,000 Capital Assets 10,100,000 Total Assets $22,300,000 Accounts Payable 2,000,000 Deferred Inflows 4,100,000 Net Pension Liability 16,000,000 Total Liabilities 22,100,000 Equity/Contributed Capital 200,000 Total Liabilities/Equity $22,300,000 Income Statement Revenues $20,000,000 Pension Revenue 2,900,000 Disbursements (19,000,000) Net Income $3,900,000

35 Employer Example Statement Balance Sheet 12/31/2012 Cash $1,000,000 Receivables 1,200,000 Investments 10,000,000 Deferred Outflows 4,100,000 Capital Assets 10,100,000 Total Assets $22,300,000 Accounts Payable 2,000,000 Deferred Inflows 4,100,000 Net Pension Liability 16,000,000 Total Liabilities 22,100,000 Equity/Contributed Capital 200,000 Total Liabilities/Equity $22,300,000 Income Statement Revenues $20,000,000 Pension Revenue 2,900,000 Disbursements (19,000,000) Net Income $3,900,000

36 Employer Example Statement Balance Sheet 12/31/2012 Cash $1,000,000 Receivables 1,200,000 Investments 10,000,000 Deferred Outflows 4,100,000 Capital Assets 10,100,000 Total Assets $22,300,000 Accounts Payable 2,000,000 Deferred Inflows 4,100,000 Net Pension Liability 16,000,000 Total Liabilities 22,100,000 Equity/Contributed Capital 200,000 Total Liabilities/Equity $22,300,000 Income Statement Revenues $20,000,000 Pension Revenue 2,900,000 Disbursements (19,000,000) Net Income $3,900,000

37 Footnote Disclosures

38 Pension Plan Description

39 Information about the employer s proportionate share of the collective Net Pension Liability (NPL) Assumptions and Other Inputs Pension plan s fiduciary net position and other information

40 Required supplementary information Notes to required schedules

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