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The New Pension Standards GASB Statements 67,68 & 71
Florida Court Clerks & Comptrollers
February 6, 2015
Mark White CPA, Audit Partner
Purvis Gray & Company LLP
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Mark…..We Really Love Pension CPE!
Two New Statements Issued June 2012
Amends No. 25
Effective FYE 2014
No. 67 Plan
Reporting Amends No. 27
Effective FYE 2015
No. 68
Employer
Reporting
3
4
Final Statements
Issued 2012
Research Project
Agendas 2006/2008
Invitation To Comment
2009
Preliminary Views
2010
Exposure Draft 2011
5
The GASB’s Deliberative Process
Mostly Notes and
RSI Changes
Change In Pension
Liability
Aggregate Employer
Information
Annual Rate of Return on Plan Assets
6
Summary of No. 67 – Plan Reporting
Very Few FS Recognition Changes
From No. 25
Clarified That Drop Liability Not
Recorded During Buildup
Applies to Pension Plan FS Issued Separately or
as P/T/F of Local Government
The No. 68 Big Picture
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Unfunded Defined Benefit Pension
Liability
Will Now Be Booked in Members
SONP of Economic Resources FS
Formerly Disclosed In FRS
Notes & RSI
No. 71 Contributions Made After MD
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ReportingDate (RD)9/30/15
Employer FYE
MeasurementDate (MD)6/30/15
Contributions Made - Deferred Outflow
MD Must Be Within One Year of RD
Who is included?
No. 68 Applies Equally To;
Single Employer
(Local Muni Plans )
Multi-Employer
Agent Plans (FLC)
Multi-Employer
Cost Sharing Plans (FRS)
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FRS Members
Member C, D……
Member B
Member A
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Each Member Will Record Their Pro-rata Share Of the Overall FRS Net Pension
Liability
Implementation
• Applied Retroactively, Restate Opening Net Position and New Pension Liability at BOY (PPA Like)
• Applied Retroactively, Restate Opening Deferred Outflows Including Contributions made After MD
• This is Unlike No. 45 OPEB Implementation Which is Being Re-examined and May Soon Change
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Up Until Now
Accounting Funding
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Same
Up Until Now
• Employer accounting and actuarial funding/contributions have been ONE
• Old GASB Statement No. 27 (current)
– The employer’s obligation is to fund the plan
– Accounting expense = (ARC) --
an actuarial funding contribution
– Almost Cash Basis, Very Little BS
effect
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Member
PlanEmployer Funding Obligation
From Now On
• Employer accounting and funding Have Been Separated!
• “We do accounting; actuaries do funding.” – Bob Attmore, GASB Chairman
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Accounting (Apples)
Funding
(Oranges)
From Now On
• New GASB Statement No. 68 Looks At It This Way;
– The employer’s obligation is “ultimately to the members”
– The Accounting Expense = More Accrual Based (Earned) No Longer Based on Actuarial Funding Contribution
– The BS Liability = Old Unfunded Accrued
Actuarial Liability
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Plan
Member
Employer
FRS - Two Actuarial Reports Now Needed
Actuarial Report For Accounting Actuarial Report
For Funding
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Will Allocate NPL In Accounting Report By
Member
Play on Words• I kept wondering why the baseball kept getting
bigger and bigger………then it hit me.
• I know a guy who is addicted to brake fluid…he says he can stop anytime.
• They told me I had “Type A” blood, but it was really …..
a Type-O.
• .
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The New Pension Liability Equation
TPL•Total Pension Liability, Minus
PNP•Plan Net Position, Equals
NPL•Net Pension Liability
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Terminology-Definitions– Total Pension Liability (TPL) – the portion of the actuarial present value of
projected benefit payments that is attributable to past periods of employee service in conformity with the requirements of Statement 68.
– Plan Net Position (PNP) - Fair Value of Plan Assets less plan liabilities - FMV as of the measurement date (no longer smoothed).
– Net Pension Liability (NPL) – difference between the TPL and the PNP
– Projected Benefit Payments – All benefits estimated to be payable through pension plan to current active and inactive employees as a result of their past service and their expected future service.
– Measurement Date - (No. 68 only) TPL and NPL measured as of the same date not more than 12 months before the reporting date.
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TPL Illustrated
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GASB Liability Definition
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Liabilities are present obligations to sacrifice resources that the government has little or
no discretion to avoid.
GASB Concepts Statement No. 4
Discount Rate = LTEROR For Plan Assets
Plan Net Position = No Asset Smoothing
TPL Calculated Using Traditional Entry Age Normal Actuarial Cost Method
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Calculating The Net Pension Liability
Change in Plan
Net Position
Change in Total Pension Liability
Change In Net Pension Liability
Deferred Inflows Outflows
Pension Expense
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Change in TPL
Recognize Some Parts Immediately
Recognize Some Parts Gradually
Deferred Outflows/In
Change in PNP
Recognize Some Parts Immediately
Recognize Some Parts Gradually
Deferred Outflows/In
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Immediate vs. Gradual Recognition
Expense Immediately
Annual Service
Cost
Benefits Paid
Plan Benefit
Changes
Interest on PY NPL
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Changes in TPL Expensed Immediately
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Changes in TPL Expensed Gradually
Assumption Changes
Actuarial Gains and
Losses
Expense Gradually
Recognized
Immediately
Projected Investment
Earnings
Benefits Paid
Administrative Expenses
Actual Contributions
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Changes in PNPGradual Recognition
For Difference In Projected Vs. Actual Investment Earnings
Deferred Inflows and Outflows
Deferred Inflows and
Deferred Outflows
Concept Statement No.
4
GASB 53-Derivatives
GASB 60 -SCA
GASB 63-Financial Reporting
GASB 65 –Items
Previously Recognized
GASB 68–
Employer Pension
Reporting
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Play on Words• I tried to catch some fog the other day but…
I mist.
• I’m reading a book about anti-gravity,…
I can’t put it down.
• I couldn’t remember how to throw a boomerang…….
but eventually it came back to me.
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Calculation of Pension Expense
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Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability
(a) (b) (a) – (b)
Balances at 12/31/X8 3,045,893$ 2,283,333$ 762,560$ 289,881$ 30,107$
Changes for the year:
Service cost 101,695 101,695 101,695$
Interest 231,141 231,141 231,141
Changes of benefit terms - -
Differences between expected and actual
experience (69,638) (69,638) - 63,582 (6,056)
Changes of assumptions - - - - -
Contributions—employer 109,544 (109,544)
Contributions—employees 51,119 (51,119) (51,119)
Net investment income 199,273 (199,273) (16,804) - (182,469)
Benefit payments, including refunds (126,863) (126,863) -
Administrative expense (3,427) 3,427 3,427
Other 8 (8) (8)
Expense for beginning deferred amounts (60,320) (3,592) 56,728
Net changes 136,335 229,654 (93,319) (77,124) 59,990
Balances at 12/31/X9 3,182,228$ 2,512,987$ 669,241$ 212,757$ 90,097$ 153,339$
Pension
Expense
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
No. 68 Timing Issues
Reporting Date (RD)=
BS Date
Measurement Date (MD) =
Within 1 Year of RD
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No. 68 Timing Issues – School Board
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6/30/15 RD
Employer and FRS FYE Are The Same
One Year
6/30/14MD
6/30/13 Beg Bal. Date
Restate For Beginning Bal
Adjust To Ending Bal
No. 68 Timing Issues – County
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9/30/15 RD
Employer FYE
Three Months
6/30/15FRS NPL
6/30/14 FRS Beg NPL
FRS FYE
Restate For Beginning Bal
Adjust to Ending Bal
9/30/14Not Available
No. 71 Contributions Made After MD
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9/30/15 RD
Measurement Date
Employer FYE
Three Months
6/30/15MD
6/30/14 Beg Bal.
Date
Contributions Made - Deferred
Outflow
Timing Issues
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I don’t know about you but I’m getting a headache!
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What about FYE 2014?
FRS Members
No Change From PY, Same Note Disclosures, Because No. 67 Applies
to Plan Reporting Only (FRS Must Implement It, Not You!)
• I don’t trust these stairs because……….
they’re always up to something.
• Police were called to a day care where a 3 year old was………..
resisting a rest.
• I used to have a fear of hurdles, but………
I got over it.
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Play on Words
No. 68 Note Disclosures Cost Sharing Plans
Plan Description
Name, Type, Terms, Admin
Classes Covered, Benefits, Authority
# participants, contributions
Assumptions
All NPL Assumptions,
LTEROR Overall and by Investment Class
Discount Rate, NPL +1%, -1% Disc. % Change
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No. 68 Note Disclosures Cost Sharing Plans
Plan FS
How to Get a Copy of the FRS FS
Significant Changes in Plan FS
Other Relevant Plan FS Information
Other Info
MD of NPL, Changes from MD to RD
Makeup of Deferred Inflow/Outflows
5 year Expected Changes in DI/ DO
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No. 68 RSI Cost Sharing Plans
10 Yr. NPL & Change in NPL
Employer’s proportion % and amount of NPL, DI & DO
Employers Covered Payroll
NPL as % of Covered Payroll, Plan Net Position as % of TPL
10 Yr. Schedules of
Actuarial Contributions, Required & Actual
Difference in Above
Actual Contributions as % of Covered PR
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Issues With Cost Sharing Plans - FRS
Need Total FRS NPL Allocated To;
Member A
Member C Member D
Member B
Member E
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Issues With Cost Sharing Plans FRS
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AICPARECENTLY ISSUED;
TWO WHITE PAPERS
DESCRIBING ISSUES
THREE AUDIT INTERPRETATIONS
PRESCRIBING SOLUTIONS
TESTING CENSUS DATA & INFO FOR
ER REPORTING
PLAN AUDITOR TO ISSUE
REPORT ON INFO BY PLAN PARTICIPANT
AND TEST CENSUS DATA
Audited CS Plan FS
Unaudited Participant
Data
Not Sufficient ER Audit Evidence
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AICPA Audit Interpretations
WHY?
Audited CS Plan FS
Audited Participant
Data
Sufficient ER Audit Evidence
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AICPA Audit Interpretations
However ER auditor has responsibility to recalculate the numerator of the percentage used in the allocation process by the plan.
Materiality Level?
Play on Words
• The dead batteries were given away……
free of charge.
• I was going to look for my lost watch but..
I could never find the time.
• A popular new broom just came out, it’s…….
really sweeping the nation.
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High-Level Implications
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More Fuel to Pension Rollback Movement
Net Position May Go Negative
Higher Profile in
CAFR
Liability From Notes
to BS
High-Level Implications
More Volatile FS as Pension Liability Bounces With Market Fluctuations
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High-Level Implications
Executive Staff and Elected Officials
Press
Employees
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Communication Challenges
High-Level Implications
Local Governments
Rush To Implement New Std.
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Start Talking With Your Auditors & FRS
Now
Play on Words• I was struggling to figure out how lightning
works……….
then it struck me.
• I used to be addicted to soap, but……..
I’m clean now.
• A hole was found in the nudist colony’s wall, the police are……..
looking into it.
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The New Pension Standards GASB Statements 67,68 & 71
Florida Court Clerks & ComptrollersFebruary 6. 2015
Mark White CPA, Audit PartnerPurvis Gray & Company LLP
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