Public Employees Retirement Association of Minnesota
An Overview of GASB 68 for Cost-Sharing Plans
Dave DeJonge
Assistant Executive Director, PERA
Public Employees Retirement Association of Minnesota
Effective Date:
Fiscal years beginning after June 15, 2014
6/30/15 or 12/31/15
Public Employees Retirement Association of Minnesota
AgendaBackground
Net Pension Liability
Pension Expense
Deferred Inflows/Outflows of Resources
Footnote Disclosures
RSI Schedules
Public Employees Retirement Association of Minnesota
Background
Current Standards:
GASB Statements 25 & 27
Pension costs are directly related to funding.
Public Employees Retirement Association of Minnesota
Pensions are part of an employee/employer exchange
A pension is the deferred piece of total compensation
Employers incur pension obligations as a result of the “employment exchange”
Pension expense should berecognized in the period servicesare provided, not when they are paid
Fundamental New Approach by GASB
Public Employees Retirement Association of Minnesota
Fundamental New Approach by GASBEmployers are primarily responsible for the unfunded
pension obligation
Net Pension Liability (NPL) = Plan Assets – Plan Liabilities
Employers need to book the NPL as a liability on government-widefinancials
Public Employees Retirement Association of Minnesota
BackgroundEmployers include their proportional share of the
NPL and Pension Expense on the face of their government-wide financial statements.
Each employer’s proportional share will be determined based on contributions paid to PERA during the measurement period.
New extensive footnote disclosures will be required.
Two new RSI schedules will be required.
Public Employees Retirement Association of Minnesota
Net Pension Liability (NPL)Equal to PERA’s Total Pension Liability (TPL)
minus PERA’s Fiduciary Net Position
Measured as of June 30 annually
Proportionate share of the NPL is reported on the employer’s Statement of Net Position TPL - FNP = NPL
Public Employees Retirement Association of Minnesota
Net Pension Liability (NPL)The NPL will be allocated to all of PERA’s employers
and included as a liability on the government-wide financial statements.
The allocation method will be based on employer’s contributions paid to PERA in relationship to all employer contributions received.
EmployerContributions Paid to PERA
(A)
PERA’s Total ER Contrib.
(B)
Proportionate Share (%)
(A/B)
PERA’s Total NPL
(C)
Proportionate Share of NPL ($)
(A/B) x C
City A $830,387 $375,000,000 0.221% $4.5 Billion $9,945,000
City B $ 62,590 $375,000,000 0.017% $4.5 Billion $765,000
Public Employees Retirement Association of Minnesota
Pension Expense (PE)No longer tied to funding (contributions)
Directly tied to changes in the NPL from one year to the next
Must be calculated by PERA’s actuary
Will likely be very volatile
May be a negativeexpense (revenue)
Public Employees Retirement Association of Minnesota
Footnote DisclosuresGASB 27
Plan DescriptionFunding PolicyEmployer ContributionsReference to PERA’s CAFR
Public Employees Retirement Association of Minnesota
Footnote DisclosuresGASB 68
Separate disclosures for each planExtensive note disclosures, including:
Description of benefits (terms, policies and authority) Contribution requirements (rates, basis and authority) Actuarial assumptions and discount rate used to measure
total pension liability Changes in actuarial assumptions Investment information (asset allocation, rates of return for
each asset class)
Public Employees Retirement Association of Minnesota
Footnote DisclosuresGASB 68 footnote disclosures (contd.)
Employer’s share and percentage of the NPL Balances of deferred inflows and outflows NPL using discount rate of +/- one percentage point
Information required will be provided by PERA
Public Employees Retirement Association of Minnesota
Required Supplementary Information (RSI)
GASB 27—None required
GASB 68—2 new schedules required
Schedule of Proportionate Share of the NPL
Schedule of Employer Contributions
Public Employees Retirement Association of Minnesota
What Will PERA Provide?Total Pension Liability (Collective Level)
PERA’s Fiduciary Net Position
Total Net Pension Liability
Total Pension Expense/Deferred Inflows & Outflows
Proportionate Share for Each Employer
Employer Contributions (Individual and Collective)
Footnote Disclosure Information
Public Employees Retirement Association of Minnesota
Important NoteNew accounting numbers are unrelated to funding
Contribution rates still set in MN State Statute
Funding plan is already in place
Public Employees Retirement Association of Minnesota
More Information
PERA’s Websitewww.mnpera.orgEmployers tabGASB 68 Toolkit
Contact Dave DeJonge [email protected]
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