5/6/2015. Completeness Assertion Risk approach How sample was selected:

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1 Overall memo related to audit approach and summary of packet Schedules of Employer

for a cost sharing employer Employer specific info and journal entries 2 AICPA Whitepapers

Cost Sharing Multiple Employer Plans: Issues Related to Information for Employer Reporting

Census Data in an Audit of Financial Statements Description of Schedule of Employer

1 1 Overall memo related to audit approach and summary of packet Schedules of Employer Allocations & Pension Amounts by Employer SOC 1 Type 2 report Note Disclosures and RSI info for a cost sharing employer Employer specific info and journal entries 2 AICPA Whitepapers published by State and Local Government Expert Panel Governmental Employer Participation in Cost Sharing Multiple Employer Plans: Issues Related to Information for Employer Reporting Single Employer and Cost Sharing Multiple Employer Plans: Issues Associated with Testing Census Data in an Audit of Financial Statements Description of Schedule of Employer Allocations and Schedule of Pension Amounts by Employer Additional information regarding census data testing 3 1

2 Completeness Assertion Risk approach How sample was selected: > 20% Contributions every year No employers >5% Contributions once every 5 years 3 employers <2% Contributions in aggregate no testing 40 employers All other employers: 166 employers rotate so that each is tested once every 10 years 4 GASB Statement 68 replaces the financial reporting requirements under GASB Statement 27 for participating employers in public pension plans. Major financial reporting and accounting changes for cost sharing plans include recognizing or reporting: 1. Liability for your proportionate share of the collective net pension liability calculated for all employers in the plan 2. Your proportionate share of collective pension related deferrals and collective pension expense 3. Deferred Inflows and Outflows of Resources of your proportional share of the total (GASB 71 related to Employer Contributions) 4. Additional Note Disclosures and Required Supplementary Information (RSI) 5 1. Specified Element Report 2. Audit opinion by RSA auditors (pages 1 2) 3. Each participating employer s proportion of specified elements is listed (pages 3 13) 4. Notes to schedules (pages 14 17) 5. Notice that some numbers are in dollars and some in thousands 6. Supplementary schedules included: A. Reconciliation of total contributions to contributions used to obtain allocation percentage (FY2013 and FY2014 pages 20 31) B. Amortization of deferred inflows/outflows, Sensitivity of discount rate, Contributions related to calculation of Collective Net Pension Liability (pages 32 34) 6 2

7 Reconciliation of total contributions to contributions used to obtain allocation percentage (FY2013 and FY2014 pages 20 31)

rate not considered in calculating the Collective Net Pension Liability: PRDB, TLI, and Admin Expense Reduced Total Contributions

Employer Rate 8 SOC 1 Type 2 report for period Jan 1, 2014 Sept 30, 2014 (to be prepared annually) Audit firm: A lign CPA s

3 7 Reconciliation of total contributions to contributions used to obtain allocation percentage (FY2013 and FY2014 pages 20 31) Total Contributions =Monthly ER Contributions+ Error Service Refunds Reduced Monthly ER Contributions by components of employer rate not considered in calculating the Collective Net Pension Liability: PRDB, TLI, and Admin Expense Reduced Total Contributions by add on component for two special units Annualized new units Formula: Contributions x (Normal + Accrued Liability Rate) / Total Employer Rate 8 SOC 1 Type 2 report for period Jan 1, 2014 Sept 30, 2014 (to be prepared annually) Audit firm: A lign CPA s Controls reviewed and tested around following : Contributions/Enrollments Investments Disbursements for benefits Valuations and Census Data 9 3

4 Provide to your auditors Complimentary User Entity Controls section pages Review your organization s controls around the following user entity controls: Enrollment Contributions Census Data Distributions IT General Controls 10 Enrollment-providing timely enrollment forms to new employees Annual checklists promptly process, review, correct and certify to RSA the completeness of the Annual Checklist Completion of non-enrollee forms Timely and accurate termination of employment and last contribution remitted 11 Follows requirements of GASB 68 Contains disclosures specific to TRS for your September 30, 2015 financials These disclosures as presented have been run through a GAAP disclosure checklist relative to GASB 68 and 71 disclosures Note: Summary of Significant Accounting Policies see suggested language Note X this is your note that gives more specific information about the TRS plan References to See Detail Table or Report 12 4

5 Valuation Date: September 30, 2013 Measurement Date: September 30, 2014 Measurement Period: Oct 1, 2013-Sept 30, 2014 Financial Statement Date: September 30, 2015 Collective Net Pension Liability for 9/30/2013 was rolled forward to 9/30/2014 using standard roll-forward procedures by actuary 13 Proportionate Share of Net Pension Liability GASB 68, paragraph 81a Covered employee payroll Not pensionable payroll Covered employee payroll during Measurement Period (FY2014) Schedule of Contributions GASB 68, paragraph 81b Contributions only for normal and accrued liability component of employer rate Covered employee payroll during fiscal year of your audit report (FY2015) 14 Pages 1-2 Information necessary for note disclosures Page 3 building blocks for amounts included in journal entries Page 4 Agency specific journal entries First two entries record the beginning amounts of the liability and deferred outflow of resources as of the implementation date (10/1/2014). These entries are only made at implementation. Entry 3 records amounts necessary to amortize the deferred inflows/outflows, adjust proportionate share of liability and record pension expense Entry 4 records the deferred outflow for current year employer contributions in accordance with GASB

6 XYZ School System Statement of Net Assets Before After Assets Current Assets $ 15,000 $ 15,000 Deferred Outflows 2,000 Capital Assets 25,000 25,000 Total Assets $ 40,000 $ 42,000 Liabilities Current Liabilities $ 6,000 $ 6,000 Net Pension Liability 26,000 Deferred Inflows 1,000 Total Liabilities $6,000 $ 33,000 Total Net Assets $ 34,000 $ 9, XYZ School System Statement of Net Assets Before After Assets Current Assets $ 15,000 $ 15,000 Deferred Outflows 2,000 Capital Assets 25,000 25,000 Total Assets $ 40,000 $ 42,000 Liabilities Current Liabilities $ 6,000 $ 6,000 Net Pension Liability 44,000 Deferred Inflows 1,000 Total Liabilities $ 6,000 $ 51,000 Total Net Assets $ 34,000 $ (9,000) Economic & Demographic Gains and Losses 2. Changes in Economic & Demographic Assumptions and Inputs 3. Changes in the Proportionate share 4. Difference between projected and actual investment earnings Numbers1 3abovearetoberecognizedovertheexpectedservicelifeofactive and inactive plan members (5.3 years as of 9/30/13). Number 4 is to be recognized over a closed five year period. 18 6

Under prior standards, employers report a pension expense equal to their contractually required annual contributions Changes in the NPL will be

in thousands) Pension Expense = + Service Cost $602,605 + Interest on TPL 2,352,804 + Changes in Plan Benefits Member Contribution (480,849)

additional (19) rate for special units Pension Expense to allocate to participating ERs $687,176 19 Project Update 20 TRS Retirement Employer

7 Under prior standards, employers report a pension expense equal to their contractually required annual contributions Changes in the NPL will be reported either immediately as a pension expense or over a period of time as deferred outflows/inflows of resources. FY 2014 (amts. in thousands) Pension Expense = + Service Cost $602,605 + Interest on TPL 2,352,804 + Changes in Plan Benefits Member Contribution (480,849) Projected Earnings on Plan Investments (1,617,082) +/ Recognition of portion of (170,283) deferred inflows/outflows Pension Expense related to additional (19) rate for special units Pension Expense to allocate to participating ERs $687, Project Update 20 TRS Retirement Employer Portal Design Requirements- Early 2016 Transition to New Employer Portal May 2017 New data elements will be required Your IT Vendor will need to be involved 21 7

Upcoming Changes to Pension Reporting Under GASB 67 & 68 and the Impact to Municipalities Participating in PERA Retirement Plans

Upcoming Changes to Pension Reporting Under GASB 67 & 68 and the Impact to Municipalities Participating in PERA Retirement Plans Patricia (Patty) French, Board Chair, PERA Wayne Propst, Executive Director,