10/3/16. Q: Why did the accountant cross the road? A: Because she looked in the files and did what they did last year.

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1 Q: Why did the accountant cross the road? A: Because she looked in the files and did what they did last year. Four Laws of Accounting: 1. Trial balances don t. 2. Bank reconciliations never do. 3. Working capital doesn t. 4. Return on investments never will. 1 A fine is a tax for doing wrong. A tax is a fine for doing well. Q: What do you call an accountant with an opinion? A: An auditor. Q: Why are accountants so always so calm, composed and methodical? A: They have strong internal controls. 2 Pensions, LEOSSA, and OPEB from a Local Government Perspective Preeta Nayak September 30,

2 Agenda GASB 68 Changes and updates Commonly asked questions GASB Statement 73 Implementation GASBs 74 and GASB 68 review Timeline for June 30, 2015 measurement date Valuation date - can be no more than 30 months and 1 day before FYE 12/31/14 R o l l f o r w a r d Measurement date no earlier than prior FYE 6/30/15 Reporting date FYE 9/30/15 12/31/15 3/31/16 6/30/16 Data availability date Spring of

3 GASB 68 JE template JE templates 7 GASB 68 JE template Info tab must be filled out accurately Year end Contributions o Prior year DO (C31) What was presented as prior year contributions subsequent to measurement date Used in 2 nd Year 2 entry Amount should be very immaterial o Current year DO (C33) Used in entry 12 If all else fails, read the instructions 8 GASB 68 - Contributions Employee contributions Expense to employer (GASB 82, paragraph 8) ORBIT comparison Should be immaterial If material, confirm that correct numbers have been entered on Info tab o If number is correct, call RSD Should include all pension contributions Regular monthly contribution Prior service cost contribution 9 3

4 GASB 68 - Allocations Between funds Unit determines allocation method Consider basing on pensionable payroll Change in intra-entity percentages Conduit entity payments Unit reimbursing conduit entity should report its proportionate share of pension numbers 10 Commonly asked questions Review T-accounts and JEs Reviewing to ensure items posted correctly o Confirm ending balances o Consider going back to year 1 if errors exist o Pension expense will not agree with Cell V13 for second year units Must add amount in line 121, cells E113 and V13 to get total pension expense for year Remember that ending balances are cumulative 11 GASB 68 Commonly asked questions Netting deferrals Only earnings on investments deferral can be netted Possible to have DO and DI for same deferral Accounting for prior service cost Liability need not be recognized because not reliably measured Beginning balance adjustment for additional pension liability 12 4

5 13 GASB 73 basics They don t have trust issues. Applies if - Assets are not set aside to pay benefits (no GASB defined trust) and Postemployment benefit that is a DB or DC pension (not OPEB) Implementation dates Asset reporting provision 06/30/2016 Everything else 06/30/ GASB 73 basics Supersedes GASB 25 plan GASB 27 - employer GASB 50 amendments to GASBs 25 and 27 Memos General overview Asset reporting provision 15 5

6 GASB 73 basics Primarily affect LEOSSA SLGFD is requiring actuarial valuation for first year of implementation Assess materiality Units that have NOT had an actuarial valuation for LEOSSA until now should present restatement due to a correction of an error o Exception is if something has significantly increased the pensionable payroll (LEOSSA liability) if yes, can be considered change in accounting principle 16 GASB 73 preparation Choose measurement date Get actuarial valuation done Should be performed by June 30, 2017 Communicate with actuary Consider gap period, if any Budget Valuation Benefits paid If paid from trust fund before, probably were not budgeted consider in GF budget 17 GASB 73 preparation Decide if you have a pension or OPEB benefit Question in IG o Limitations on spending/accountability? Yes OPEB 74/75 No pension

7 Establishing trusts Units are setting up trust to account for LEOSSA This triggers implementation of GASBs 67 and 68 for that plan Can report as though Trust existed at beginning of fiscal year IF have all information needed to implement GASB 68 o Beginning balances, net pension liability o Most practical Trust did not exist at beginning of fiscal year o More complicated 19 Current year GASB 73 presentation changes Only asset reporting provision goes into effect in 6/30/16 FYE Carolina County example Contributions BFS No pension trust fund Restatement for consolidation into another fund Committed fund balance 20 GASB 73 presentation changes Notes NPO calculation should only include benefits paid o Units that had NPA in previous years might have NPO Should have PAYGO verbiage RSI Schedule of contributions eliminated Actuarial value of assets in RSI tables on funding progress can remain 21 7

8 Reporting based on funding Funding as of 6/30/2016 FYE 2016 FYE 2017 PAYGO No changes GASB 73 reporting Non-GASB defined trust Pension trust fund eliminated Committed fund balance Restatement Contributions not applied towards NPO GASB 73 reporting GASB defined trust GASB 67 and 68 GASB 67 and Differences from GASB 68 No dependence on State for data Not cost-sharing plan Total liability will go on books No assets to offset liability Unit, not the State, will choose timeline as long as it complies with guidance Valuation date Measurement date

9 OPEB - déjà vu all over again Statements 74 and 75 Both trust and non-trust arrangements Single-employer plans Units will bear most of the burden for this standard Cost-sharing plan State Health Plan will mirror implementation of GASB 68 LGC requiring valuation in first year unless exempted in writing 25 GASB 74 Implementation date FYs beginning after 6/15/2016 Plan reporting Note disclosures and RSI Similar to GASB 67 For most units will have new RSI because plan is unit s plan 26 GASB 74 preparation Get actuarial valuation done Decide on valuation date Can be up to 24 months before plan s FYE still have biennial option Select measurement date Must be same as plan s FYE Choose wisely must be consistently applied Consider roll forward procedures if necessary 27 9

10 GASB 75 Implementation date FYs beginning after June 15, 2017 Actuarial valuations Required biennially no triennial option AMM still option IF o Meets other requirements of 75 AND o Only benefit offered is implicit rate subsidy 28 GASBs 74 and 75 miscellany Possible gap year if measurement date and valuation date are not the same Give yourself enough time to Familiarize yourself with the standard Gather all the information you need Find new actuary or communicate with current actuary Understand and document your plan 29 Which statement applies? 67/68, 73, or 74/75? Unit offers benefit Pension or OPEB? Pension In trust? Yes GASBs 67/68 apply OPEB No GASBs 74/75 apply GASB 73 applies 30 10

11 31 Thank You! Together we can build and maintain a fiscally strong and prosperous North Carolina. 11