MEMORANDUM. CAFR Changes

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1 MEMORANDUM DATE: February 2, 2015 TO: Members of the Board of Retirement FROM: Brenda Shott, Assistant CEO, Finance and Internal Operations SUBJECT: GASB 67/68 Update Recommendation: Receive and file. Background: In June 2012, Governmental Accounting Standards Board (GASB) issued Statement No. 67, Financial Reporting for Pension Plans, effective for plan years beginning after June 15, The purpose of this statement is to improve the decision-making usefulness of pension information included in the general purpose external financial reports of governmental pension plans and increase transparency, consistency and comparability of pension information across governments. OCERS will be adopting this statement in its financial statements for the year ended December 31, This report provides a summary of changes to the upcoming 2014 Comprehensive Annual Financial Report (CAFR) resulting from the implementation of GASB 67 and an update of outreach efforts to all stakeholders involved in the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, which affects the financial statements of OCERS Plan Sponsors. Discussion: CAFR Changes The new guidance has shifted reporting from a funding-based approach to an accounting based approach. It is important to note that only the accounting reporting has changed; the pension plan itself remains unchanged. Using the 2013 CAFR as a guide, following is a summary of the reporting changes we can expect in OCERS 2014 CAFR: I-6 GASB 67/68 Update Page 1 of 6 February 17, 2015 Regular Board Meeting

2 Section II: Financial The Basic Financial Statements (Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position) will remain the same; however, significant changes will be made to the Notes to the Basic Financial Statements in the Financial section of the CAFR as listed below: Note 2 Summary of Significant Accounting Policies Investment Valuation - An additional paragraph providing information about the pension plan s investment policies, including asset allocation by asset class and target allocation, the procedures and authority for establishing and amending policies, and a description of significant investment policy changes during the reporting year, if any. Effect of New Governmental Accounting Standards Board (GASB) Pronouncements - GASB Statement No. 67 will be added to the disclosures and address any impact to OCERS financial statements. Note 3 Investments Concentration of investments will be added to this section, identifying investments in any one organization that represents 5% or more of the pension plan s fiduciary net position. The annual money-weighted rate of return on the assets of the Plan, net of investment expenses, will be included in the investments disclosure as well as a description that this rate of return expresses investment performance, net of pension plan investment expenses, adjusted for the timing of cash flows and the changing amounts actually invested. Note 10 Pension Disclosures The funding progress previously included in this section will be moved to Section IV, Actuarial. The actuarial information and assumptions used in determining contribution rates will be moved to the Required Supplementary Information section of the CAFR. New Note Disclosure Net Pension Liability of Participating Employers A new disclosure is required that provides additional information about the net pension liability (NPL), including the components of the net pension liability of participating employers: total pension liability (TPL), plan fiduciary net position (FNP), the net pension liability (NPL) and the plan s FNP as a percentage of the TPL. Additional information will also be disclosed about the significant assumptions and other inputs used to measure the total pension liability such as inflation, salary changes, mortality rates and the discount rate used. I-6 GASB 67/68 Update Page 2 of 6 February 17, 2015 Regular Board Meeting

3 The disclosure will also discuss the long-term expected real rate of return and how it was determined, as well as the assumed asset allocation of the plan s portfolio and the weighted average long-term expected real rate of return for each major asset class. A new schedule will also be included, Sensitivity of Net Pension Liability to Changes in the Discount Rate, which will calculate the NPL using the current discount rate, the discount rate plus 1% and the discount rate minus 1%. Section II: Required Supplementary Information (RSI) A new 10-year schedule will be added to this section, Schedule of Changes in Net Pension Liability of Participating Employers, and present the beginning and ending balances for each of the following items: 1) the total pension liability (TPL), 2) the pension plan s fiduciary net position (FNP), and 3) the net pension liability (NPL). In addition, this schedule will be combined with a funding progress schedule that in addition to the information previously listed, will also include the plan s FNP as a percentage of the TPL, the covered-employee payroll and the NPL as a percentage of covered-employee payroll. This section will also include a 10-year schedule, Schedule of Employer Contributions, that provides information about the actuarially determined contribution (ADC), including the ADC, the contractually required contributions if different from ADC, the amount of actual contributions recognized during the fiscal year by the plan, the difference between the ADC and the amount of contributions recognized by the plan in relation to the ADC, the covered employee payroll and the amount of contributions recognized by the plan in relation to the ADC as a percentage of covered employee payroll. Previously, this was a six year schedule that presented annual required contributions and the amount and percentage actually contributed. The RSI section will also include a 10-year schedule, Schedule of Investment Returns, which will present for each fiscal year the annual money-weighted rate of return on pension plan investments using the internal rate of return on pension plan investments net of pension plan investment expenses, calculated at a minimum on a monthly basis. (Note: Until a full 10-year trend is compiled, upon implementation of GASB 67, only the most recent year s information is required.) Actuarial information and assumptions used in determining contribution rates that were previously disclosed in the Financial section under Note 10 Pension Disclosures will be moved to this section of the CAFR. This section will also include changes in benefit terms and assumptions used in determining total pension liability, as well as the differences between expected and actual experience with regard to economic or demographic factors. I-6 GASB 67/68 Update Page 3 of 6 February 17, 2015 Regular Board Meeting

4 Section IV: Actuarial The Actuary Certification Letter will be expanded, including a discussion that the actuarial cost method used for funding purposes will differ from the actuarial cost method used for financial reporting purposes. It will also include a discussion on whether the actuarial assumptions used for funding purposes differ from those used for financial reporting purposes. The Schedule of Funding Progress that was previously disclosed in the Financial section under Note 10 Pension Disclosures will be moved to this section of the CAFR. The minimum number of years presented on this schedule, as well as other supporting schedules in this section (e.g., Solvency Test, Schedule of Active Member Valuation Data, Schedule of Retirants & Beneficiaries, and Analysis of Financial Experience), will change from six years to ten years. GASB 68 Implementation Assistance to Plan Sponsors In conjunction with the implementation of GASB 67, OCERS will be assisting Plan Sponsors with the implementation of GASB 68, Accounting and Financial Reporting for Pensions. The most significant change to the Plan Sponsors financial statements will be recording their proportionate share of the overall Net Pension Liability of OCERS in their June 30, 2015 financials. Below is a summary of our outreach efforts to communicate these changes to all stakeholders affected by these new requirements: Meetings OCERS has been proactive in reaching out to all stakeholders impacted by the new reporting requirements, including an August 2013 meeting with Plan Sponsors to discuss expectations and implementation decisions, and holding a conference call in August 2014 with Segal, MGO, Plan Sponsors and their external auditors to discuss an implementation plan encompassing the required schedules that Segal and OCERS will be providing to all Plan Sponsors and how the census data for active members will be audited. This conference call was followed up by an all-hands meeting held at OCERS in September Both Segal and MGO made presentations; Segal provided a preliminary proportionate share schedule with pro forma data based on rate groups and MGO discussed how they anticipated auditing the census data for active members at the Plan Sponsors using a risk-based approach that would not require visiting every Plan Sponsor but would most likely include the largest Plan Sponsor (the County of Orange) and rotating among the smaller systems. Another all-hands meeting is planned for February 10, At this next meeting, it is anticipated that Segal will present their latest draft of pro-forma schedules and the timing of when Plan Sponsors can expect to receive their final schedules and calculations in order to implement GASB 68. MGO will address their audit plan for census data and the impact on Plan Sponsors. I-6 GASB 67/68 Update Page 4 of 6 February 17, 2015 Regular Board Meeting

5 GASB 67 & 68 Fact Sheet and GASB 67 & 68 Questions and Answers In addition to the all-hands meetings and conference calls, OCERS outreach efforts also included the distribution in early February 2015 of a GASB 67 & 68 Fact Sheet and GASB 67 & 68 Questions & Answers (see attached). This literature was compiled for our Plan Sponsors to use with their boards and other stakeholders in communicating the impact of the new accounting reporting requirements. Implementation Schedules provided by Segal Working with Segal, OCERS will provide to Plan Sponsors the proportionate share of the net pension liability and other pension-related amounts to assist employers with the new reporting requirements. OCERS will also provide sample note disclosures about the pension trust fund which Plan Sponsors can choose to include in their financial statements. At the last on-hands meeting held in September 2014, Segal shared a pro forma proportionate share calculation that was based on rate groups and then used both employer and employee contributions within the same rate group where there was more than one employer. Since this meeting, OCERS has learned from GASB that when calculating proportionate share within a rate group, only employer contributions can be included. OCERS was also specifically advised by GASB that reverse pick-ups, for which there was no specific guidance in the statements themselves or in the implementation guide, are NOT to be included in the proportionate share calculation as they are treated as employee contributions (i.e., they are actuarially determined employer contributions for funding purposes that are paid for by the employee). As a result, Segal will be changing the way they calculate proportionate share in the pro-forma schedules to include only employer contributions. New pro-forma schedules will be shared at the next allhands meeting. Summary: OCERS is in the process of preparing for the audit of the December 31, 2014 financial statements with fieldwork scheduled to begin in early April. Staff will be working closely with Segal and MGO to incorporate all the GASB 67 disclosures as previously discussed and anticipates that the CAFR will be timely filed with the State Controller s Office by June 30, Concurrent with our reporting deadline, it is anticipated that staff, working closely with Segal, will be providing all proportionate share schedules, calculations and sample note disclosures to our Plan Sponsors to assist them as they begin implementing GASB 68 reporting requirements in their June 30, 2015 financial statements. I-6 GASB 67/68 Update Page 5 of 6 February 17, 2015 Regular Board Meeting

6 Submitted by: Brenda Shott Assistant CEO, Internal Operations I-6 GASB 67/68 Update Page 6 of 6 February 17, 2015 Regular Board Meeting

7 INTRODUCTION What are the new rules? The Governmental Accounting Standards Board (GASB) issued two related statements which substantially change the accounting and financial reporting of pensions for OCERS and OCERS plan sponsors. GASB Statement No. 67 (GASB 67), Financial Reporting for Pension Plans, affects the financial statements of OCERS. GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions, affects the government-wide financial statements of OCERS plan sponsors. OVERVIEW What is going to change? GASB 68 replaces the accounting and reporting requirements of GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, for OCERS plan sponsors and is effective for fiscal years beginning after June 15, GASB 68 also replaces the requirements of GASB Statement No. 50, Pension Disclosures. Prior to the new rules, each employer s obligation was simply considered to be the amount that the employer was contributing toward the plan on an annual basis. GASB now will require, for purposes of governmental financial reporting, that a portion of the total Net Pension Liability (this amount is similar to what was previously referred to as the unfunded liability but is prepared using the market instead of smoothed value of assets) be shown on each employer s balance sheet even though no employer will be required to pay-off this liability today or in any accelerated fashion. As market value is used in the calculation, the pension expense (which is the annual change in Net Pension Liability) that will be reported by employers is expected to be volatile from year to year. The amortization period for recognizing items such as actuarial gains and losses and changes in assumptions for reporting purposes will be equivalent to the remaining service life of all members in the plan (including retired members who have no remaining service years). This will be a much shorter amortization period than what is used for funding purposes. It is important to note that the new Statements no longer require disclosure of funding requirements but instead focus on accounting and financial reporting issues how pension costs and obligations are measured and reported in financial statements. Although the appropriate portion of the Net Pension Liability will show on each employer s balance sheet,

8 contribution requirements to OCERS are not impacted by the new GASB requirements. Employer and employee contribution rates are set by the OCERS Board of Retirement annually in accordance with OCERS Funding Policy and as governed by the California Government Code. Previously, there had been a close relationship between how governments fund pensions and how they account and report information related to pensions. The new guidance is a definitive shift from a funding-based approach to an accounting-based approach. According to GASB, this shift will improve the decision-usefulness of employer-level reported pension information and increase the transparency, consistency and comparability of pension information across governments. Despite these new accounting and reporting changes for pensions it is important to note that the factual situation of the pension plans that our plan sponsors have been participating in HAVE NOT CHANGED, only the way those plans are accounted for and reported on is changing. ITEMS REQUIRING DISCLOSURE AND DESCRIPTION What can I expect? The Total Pension Liability of the pension plan is annually calculated by OCERS actuaries and accounts for each future benefit payment that will be made, decades into the future to current employees of all OCERS plan sponsors. The total Net Pension Liability, as described in the new Statements, is determined by subtracting the pension plan s Fiduciary Net Position from the Total Pension Liability. The Net Pension Liability can more commonly be described as the unfunded liability of plan sponsors for plan members benefits provided through a defined benefit pension plan. Under the new GASB standards, each plan sponsor will be required to report on their financial statements the proportionate share of the overall Net Pension Liability of OCERS. A plan sponsor s proportion is determined by first looking at the rate group(s) in which the plan sponsor is included. Rate groups are a collection of members who are or were employed by plan sponsors that offer similar pension benefit formula(s). Rate groups exist for the purpose of risk-pooling and the contribution rates developed by the actuary should, in the long-term, fairly and accurately reflect the benefit plan offered/promised to members in each group. Rate groups can contain one or more plan sponsors and plan sponsors may be included in one or more rate groups. In rate groups that have multiple plan sponsors, a plan sponsor s proportion (a percentage) is determined considering the plan sponsor s contributions for the current year as a percentage of the current year total contributions from all employers in that rate group to the plan. In calculating a plan sponsor s contribution for the year only amounts paid by the plan sponsor (that are not considered to be part of the employees salary) will be included (i.e. reverse pick-ups are considered employee contributions not employer contribution). This percentage is then applied to the major reporting elements, including the Net Pension Liability, deferrals related to pensions, and pension expense, to determine the employer s proportionate share of each of these items. Keep in mind that the Net Pension Liability is similar to other long-term liabilities reported on an employer s balance sheet in that it is not immediately due. The funding of pension liabilities is now disconnected from how the

9 liability and pension expense (as discussed further below) is accounted for and reported. The method in which entities fund their pension liability is systematic and assumed to occur over a long period of time. The Statements do not change the method or requirements on how to fund pension liabilities and expenses. It is important to also note that rating agencies have been aware of the funding policies and status of governmental pension plans. They have historically incorporated that information into their analysis of a government s ability to meet its debt obligations. These new reporting changes are not anticipated to result in drastic changes to the ratings of most governmental entities. GASB 68 also requires employers to recognize a new measurement of the pension expense on their financial statements. The pension expense reported in a governmental entity s financial statement will no longer be equal to the contribution amount set by the actuary. Rather, the new definition of pension expense represents the change in Net Pension Liability from year to year and contains the following items: Annual cost of the current service accrual(normal cost); Interest on the Total Pension Liability; Amortization of experience gain/losses, changes in assumptions, expected vs. actual investment earnings, and changes in plan benefits (amortization period will over the remaining service life of all members, including retirees); Employee Contributions; Administrative Expenses; Expected return on plan assets Because this new measure includes items that can change materially from one year to the next, it is imperative to recognize that the amount of the pension expense may be volatile from year to year. Pension expense as reported in accordance with the new Statements is NOT consistent with actuarially determined contributions. Again, the link between accounting and reporting of pensions and the funding or paying for pensions has been broken. Currently, plan sponsors are required to include basic note disclosures in their financial statements while expanded information is included in OCERS financial statements. GASB 68 increases the amount of note disclosures that are required in the financial statements of OCERS plan sponsors. In order to draft the note disclosures, OCERS plan sponsors will be able to utilize some of the extensive disclosures contained in OCERS financial statements, as well as recommended language OCERS intends to make available to all OCERS plan sponsors. CONCLUSION GASB has released two new statements that will substantially change the accounting and financial reporting of pensions for OCERS plan sponsors and OCERS. The key implications of these changes are: A new balance sheet liability for plan sponsors (the Net Pension Liability) A new definition of pension expense (or income) Additional disclosures on the financial statements OCERS will continue to work with our affiliated employers and their governing boards to understand and implement the changes required by GASB 68.

10 GASB 67 & 68 Q & A The Governmental Accounting Standards Board (GASB) issued two related statements which substantially change the accounting and financial reporting of pensions for OCERS and OCERS plan sponsors. Statement No. 67, Financial Reporting for Pension Plans, affects the financial statements of OCERS; Statement No. 68, Accounting and Financial Reporting for Pensions, affects the financial statements of employers. Here are answers to some frequently asked questions about these new reporting standards: What is GASB? GASB is an independent, non-profit, non-governmental regulatory body charged with setting authoritative standards of accounting and financial reporting for state and local governments. When do these new standards go into effect? Statement No. 67 replaces the requirements of the existing Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and is effective for fiscal years beginning after June 15, OCERS will include these new requirements in its CAFR for the year ended December 31, Statement No. 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. This reporting requirement applies to the GAAPbased financial statements of employers and is effective for fiscal years beginning after June 15, What do these new standards mean for employers? Each employer is part of OCERS cost-sharing multiple-employer defined benefit pension plan (Plan) and assets are maintained in one pension trust fund by OCERS. GASB now will require, Page 1 of 7

11 for purposes of governmental financial reporting, that a proportionate share of the total pension liability less the Plan s fiduciary net position be shown on the face of each employer s financial statements. Similarly, a proportionate share of the total pension expense and collective deferred inflows of resources and deferred outflows of resources of the pension trust fund at OCERS will also be shown on the face of each employer s financial statements. In addition, these standards will require employers to include additional note disclosures about the pension trust fund in their financial statements. Is this liability due and payable immediately? No, the net pension liability is similar to other long-term liabilities reported on an employer s balance sheet, in that it is not immediately due. Contribution rates are set by OCERS Board of Retirement annually. Will these changes affect the amount of contributions sent to OCERS? No, only the Board of Retirement has the authority to change the contribution rates. Although a proportionate share of the collective net pension liability is shown on the face of each employer s financial statements, contribution requirements to OCERS are not directly impacted by this financial reporting change. Do the new GASB Statements establish requirements for how governments should fund their pensions? No, the new reporting standards break the link between actuarial funding and financial accounting for pensions. Previous GASB standards required pension plans to calculate the annual required contribution (ARC) and report payments toward the ARC. This measured the plan s funding of the pension obligation. The new standards consider only how systems account for and report pension costs. Will OCERS provide net pension liability and other pension-related amounts to assist employers with GASB Statement No. 68? Yes, OCERS will provide several calculated items to assist employers. These items will be at both the pension trust fund, or collective level and the proportionate share, or employer level. The calculations to be provided include: net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense amounts. The information will be available approximately six months after the end of OCERS plan year. So for the first year of implementation, employers can expect to have the information in June Will the proportionate share calculation of the collective net pension liability and other collective pension-related amounts be audited? Yes, OCERS will prepare a schedule of employers allocation percentages for all employers participating in the Plan on an annual basis. It is understood at this time that this schedule will be Page 2 of 7

12 audited by OCERS s auditors to ensure the employers are receiving accurate allocation information. The AICPA has published a white paper containing a proposed schedule of employer allocations. It s important to note that OCERS can only provide the allocation percentage at the employer level within each rate group. An employer s allocation percentage will be calculated for each OCERS reporting agency. However, if the OCERS reporting agency is a primary government with component units or is a component unit of a separate government, employers may need to perform further allocations or roll-ups of pension-related amounts based on their financial reporting structure. What is the basis used for calculating the employers allocation percentages? In accordance with the standard, OCERS will calculate the allocation percentage using the existing rate group structure. For rate groups with multiple employers, OCERS will use current year s employer contributions on an accrual basis based on OCERS s year-end of December 31. Employer contributions will include contributions made to OCERS to satisfy the employee contribution requirements that are not deposited in the member s contribution account (per County Employees Retirement Law Section ). Employer contributions will NOT include contributions made by employees to satisfy employer contribution requirements (reverse pick-ups are excluded from the proportionate share calculation). OCERS will continue to share reports which employers can use to reconcile contributions made on a cash basis to the contribution amounts derived for the employer allocation percentage schedule. Will employers need to maintain amortization schedules for deferred outflows of resources and deferred inflows of resources? No. OCERS will maintain amortization schedules for pension-related information at the collective and employer level for the pension trust fund and the number of years each deferral is to be amortized. OCERS will also maintain the employer-level amortization schedules for deferrals arising from the change in the employer s allocation percentage. However, it should be noted that the lowest level of information OCERS can provide employers is at the reporting agency level, which does not necessarily match the amounts an employer would need to report on their financial statements. Will OCERS assist employers with the note disclosures required by the new reporting standards? Yes. OCERS will provide sample note disclosures about the pension trust fund which employers can choose to include in their financial statements. It may be very difficult for employers to complete these pension trust fund disclosures without assistance from OCERS. However, the employer s financial statements are the responsibility of the employer s management, OCERS cannot and will not take responsibility or ownership for employer reporting requirements but instead will provide information for the disclosures that may be used. Page 3 of 7

13 When does OCERS publish its CAFR? OCERS s fiscal year-end is December 31 and normally publishes its CAFR in late June following the fiscal year-end. It s important to note that OCERS performs an actuarial valuation on an annual basis as of December 31. Historically, the valuation results for a given year were included in the current year s CAFR, with the implementation of GASB 67, OCERS will be adopting the rollforward method of updating the previous year s actuarial valuation for inclusion in the CAFR and in the schedules to be provided to employers. This is an allowable method by GASB and is necessary to reduce the risk of untimely information that could delay employer s financial statements from being completed and audited. Where can I find additional information about the new pension reporting standards? The new reporting pronouncements are available on the GASB website. GASB also published a plain language document covering these pronouncements which may prove helpful. Consultation with an independent auditor or your own accountant about these GASB standards and their implementation also is encouraged. Will OCERS provide any information I can use to communicate these new reporting standards for pensions to my governing board? Yes. OCERS has developed a fact sheet for the specific purpose to help communicate the issues surrounding the new reporting standards to your governing boards. Are the new reporting standards, detailed in Statement Nos. 67 and 68, applicable to Other Postemployment Benefit (OPEB) plans? No. GASB Statement Nos. 67 and 68 do not apply to OPEB plans. Currently, GASB is deliberating the possibility of adopting improvements to the existing standards for accounting and financial reporting for OPEB plans. New guidance pertaining to OPEB plans currently is in Exposure Draft form with final guidance anticipated in June Who do I contact with specific questions about the new reporting standards? Please contact Brenda Shott, Assistant CEO, Finance and Internal Operations at bshott@ocers.org or Tracy Bowman, Director of Finance at tbowman@ocers.org for any questions you have regarding the new reporting standards. Page 4 of 7

14 Useful Links Official GASB Links Governmental Accounting Standards Board (GASB) GASB Toolkit GASB s pension implementation toolkit assists governments in implementation on Statement No. 68 and Statement No. 71. GASB Statement No. 67 Financial Reporting for Pension Plans GASB Statement No. 68 Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 GASB Statement No. 68 Implementation Guide Guide to implementation of GASB Statement No. 68 on Accounting and Financial Reporting for Pensions GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 GASB declines to delay implementation date of pension standards March 24, 2014 Planning For New Pension Statements Auditing AICPA Whitepaper: Single-Employer and Cost-Sharing Multiple-Employer Plans: Issues Associated with Testing Census Data in an Audit of Financial Statements The purpose of this whitepaper is to address the role of census data in single-employer and costsharing plan financial statements and the plan auditor s responsibility for such census data. Single-employer and cost-sharing plans are covered together in this whitepaper because they have similar reporting and disclosure requirements. This whitepaper addresses the responsibility of the cost-sharing plan to obtain all necessary information and the plan auditors to obtain sufficient appropriate evidence regarding the completeness and accuracy of all census data underlying certain financial statement elements of the plan. AICPA Whitepaper: Governmental Employer Participation in Cost-Sharing Multiple- Employer Plans: Issues Related to Information for Employer Reporting This whitepaper was prepared by the AICPA State and Local Government Expert Panel (SLGEP) and is intended to describe accounting and auditing issues facing governmental employers (employers) that participate in cost-sharing multiple-employer defined benefit pension plans (cost-sharing plan or plan), as well as best practice solutions to address these issues. KPMG Webcast: Critical Issues in Implementing the New GASB Pension Standards A Look at Where We Are Now The KPMG Government Institute, and partners and professionals of KPMG LLP, invite you to join them for an urgent discussion of critical issues facing governments as they implement the new Governmental Accounting Standards Board (GASB) pension standards. The discussion will include the status of the AICPA's proposed recommendations for plans to communicate pension information to employer governments, as well as AICPA pension-related audit guidance. Page 5 of 7

15 Other Resources GRS Insight: The GASB s New Pension Accounting and Financial Reporting Standards Page 6 of 7

16 Glossary Net Pension Liability (NPL) Each employer s share of the unfunded liability (Total Pension Liability minus the Pension Plan s Fiduciary Net Position) associated with their employees who participate in OCERS. Discount Rate A blended or single rate (expressed as a percentage) that reflects (1) the longterm expected rate of return on pension plan investments to the extent (a) this rate will support projected benefit payments of the plan, and, (b) assets will be invested using the current allocation targeted to achieve that return, and (2) for the period of benefit payments not supported, will incorporate an index rate for 20-year tax-exempt municipal bonds. Employer s Proportion A measure of the proportionate relationship of an employer of a costsharing pension plan like OCERS to all employers of the plan. Pension Expense Represented by changes in OCERS s Net Pension Liability, recognized in the current reporting period. There are some exceptions that include changes due to differences between expected and actual experience, changes in economic and demographic assumptions, and the difference between projected and actual earnings on pension plan investments. Pension Plan s Fiduciary Net Position Difference between assets, plus deferred outflows of resources, minus liabilities, minus deferred inflows of resources of the plan. Proportionate Shares Measures of the collective Net Pension Liability, collective Pension Expense and other disclosure items of the plan related to pensions attributable to a specific employer, based on the Employer s Proportion. Total Pension Liability The portion of the actuarial present value of projected benefit payments (reflecting projected service and anticipated salary and benefit increases) that is attributed to past periods of OCERS member service, similar to current Actuarial Accrued Liability (AAL), determined under the Entry Age Actuarial Cost Method, calculated using the Discount Rate. Page 7 of 7