Upcoming GASB Changes
Presented by
Darla Iverson
Glenna Musselman
Chief Financial Officer
Senior Accountant
July 25, 2013
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What Is GASB?
GASB stands for…
Governmental
Accounting
Standards
Board
To learn more about GASB, go to the GASB
website at www.gasb.org.
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New Accounting Standards
• Two new GASB statements
– Statement No. 67 applies to the PLAN.
• IPERS’ fiscal year 2014
– Statement No. 68 applies to EMPLOYERS
who utilize GAAP reporting.
• The fiscal year that begins after 6/15/2014
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Breaking the Link
• Currently actuarial valuation numbers used
for accounting and funding purposes.
• Funding measures still valid and essential
but no longer reported in financial reports.
• The new standards change the way public
pension obligations are reported in financial
reports.
• Accounting and funding are no longer
linked.
4
Financial Numbers
Total pension liability (TPL): actuarial present value
of projected benefit payments allocated during
past periods of employee service.
Net pension liability (NPL): TPL minus market value
of assets.
Pension expense (PE): the difference between the
NPL from the prior fiscal year to the current fiscal
year, with some adjustments.
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Total Pension Liability
What is total pension liability?
Similar to actuarial accrued liability in the valuation,
but may use a different discount rate.
What will IPERS do with this number?
It will be disclosed in our CAFR and Required
Supplementary Information (RSI).
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Discount Rate
Discount rate
The actuarial assumed investment return, set by the
Investment Board, is currently used for both accounting
and funding purposes.
Blended rate
This is a new discount rate for financial reporting used
when the projected net assets are NOT sufficient to cover
projected benefit payments.
It is a blended rate using the actuarial assumed investment
return and a 20-year municipal bond index rate.
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Net Pension Liability
What is net pension liability?
TPL minus market value of IPERS’ assets = NPL
What will IPERS do with this number?
This will be apportioned among the employers and
reported on their financial statements.
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Pension Expense
What is pension expense?
The difference in NPL from the previous year to the
current year, with some adjustments the calculations will
take into account.
What is done with this number?
This will be apportioned among the employers and
reported on their financial statements.
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Employer Allocation
• IPERS is a multiple-employer, cost-sharing pension
plan.
• There are over 2,100 participating employers.
• Under the new standards, each employer utilizing
GAAP reporting will record their share of the net
pension liability and pension expense based on their
proportion of contributions paid to IPERS.
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Proportionate Shares
Collective NPL = $1,000
This example shows how
the collective NPL and
$120
PE are apportioned
among the employers
$330
$140
Employer A
Employer B
Employer C
Employer D
Employer E
$240
based on the
percentage of
contributions made by
each employer
$170
compared to total
contributions.
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Employers’ Responsibilities
This is NEW and IMPORTANT:
• Employers will have to recognize their share
of the net pension liability (NPL).
• And a new measure of the pension expense
(PE) on their financial statements.
12
Employers’ Responsibilities
Additional notes and disclosures will be
required.
Some of the new Notes include:
– Expanded pension plan description
– Information about employer’s
proportionate share of NPL
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Employers’ Responsibilities
RSI and Notes to RSI
• 10-year schedules
– Employer’s proportionate share of NPL
– Contributions paid compared to
contributions required
– Information about significant
changes/trends
– Build schedules prospectively
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What This Means…
• A pension liability on the employer’s
financial statements.
– Current standards require pension liability only
if contractual contributions not paid.
• A pension expense different from the
current expense of contributions paid.
Contributions are determined by actuarial
methods, not accounting standards.
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Education & Outreach
For employers
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–
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–
The Latest Word newsletter
Reporting officials training
Office of Auditor of State
Presentation to the School Administrators of
Iowa (SAI) - Aug. 7 and Aug. 14
– Presentation to the Iowa Association of School
Board Officials (IASBO) – Sept. 26
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Questions?
• If you have questions about this presentation,
please send them to:
employerrelations@ipers.org
• We will do our best to provide you with the
information you need.
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Stay Tuned!
Additional online resources
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GASB: www.gasb.org
NIRS: www.NIRSonline.org
GFOA: www.GFOA.org
Gabriel Roeder Smith & Company:
www.gabrielroeder.com
– Cavanaugh Macdonald Consulting:
www.CavMacConsulting.com
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