Auxiliary Organizations
GASB Statement No. 68
Accounting and Financial Reporting
for Pensions
Sheralin Klinthong, Associate Director, FS / SFSR
Chancellor’s Office
May 19, 2015
Learning Objectives
At the end of the session, participants should be able to:
• Understand the accounting and financial reporting
implications of GASB Statement No. 68.
• Understand the components of net pension liability,
pension expense, and deferred outflows/inflows of
resources related to pension.
• Know the required note disclosures and supplemental
information.
May 2015
Year-End GAAP Training
2
Overview - GASB Statement No. 68
 In June 2012, the Governmental Accounting Standard
Board (GASB) issued Statement No. 68, Accounting and
Financial Reporting for Pensions, effective for fiscal year
beginning after June 15, 2014.
 Implementation of GASB 68 requires employers to
recognize a liability as employees earn their pension
benefits versus unfunded annual required contribution.
 GASB 68 requires the recognition of net pension liability
and deferred outflows/inflows of resources in the SNP
and pension expense in SRECNP.
May 2015
Year-End GAAP Training
3
Scope and Applicability
• Scope is limited to defined benefit and defined
contribution pensions provided through trusts that meet
following criteria:
• Employer/non-employer contributions irrevocable
• Plan assets are dedicated to providing pensions
• Plan assets are legally protected from creditors
• Excludes all Other Postemployment Benefits (OPEB)
• Applies to employers and non-employer contributing
entities legally obligated to contribute to the plan
May 2015
Year-End GAAP Training
4
Scope and Applicability (cont.)
• A special funding situation arises when a nonemployer entity makes contributions directly to
the plan and one of the following conditions
holds:
• Non-employer contributing entity is the only entity
required to contribute to the plan, or
• Amount of contributions legally required from the
non-employer contributing entity is not dependent
on a factor unrelated to pension.
May 2015
Year-End GAAP Training
5
Three Pension Plan Types
Single
Employer
• Single pension plan that covers the employees of a single
employer.
Agent
Multiple
Employer
• Single pension plan that covers the employees of multiple
employers.
• Plan assets are segregated for each participating employer and
cannot legally be used to pay other employer’s pension obligation.
Cost Sharing
Multiple
Employer
May 2015
• Single pension plan that covers the employees of multiple
employers.
• Plan assets are not legally segregated for each participating
employer and can legally be used to pay other employer’s
pension obligation.
Year-End GAAP Training
6
Pension Accounting for Employer
• GASB issued a detailed implementation guide for
Statement No. 68 in early 2014. Below is the link
to the GASB website for future reference.
http://gasb.org/jsp/GASB/Page/GASBSectionPage
&cid=1176163026371
May 2015
Year-End GAAP Training
7
Pension Accounting for Employer
Single
Employer
• Calculation of pension expense and net pension liability is
straightforward, particularly if no special funding situation
applies.
Agent
Multiple
Employer
• Each participating employer will get an individual calculation
of specific net pension liability, since individual employer total
pension liability and fiduciary net position of plan assets will
be available.
Cost Sharing
Multiple
Employer
May 2015
• A proportionate share of the net pension liability and total
pension expense must be calculated for each participating
employer.
Year-End GAAP Training
8
Measurement – Key Dates
• Fiscal Year-End
• Measurement Date
o No earlier than end of prior fiscal year
o Total pension liability and plan fiduciary net position are
calculated as of this date
• Actuarial Valuation Date (of total pension liability)
o If not measurement date, as of date no more than 30 months (+1
day) prior to FYE
o At least every 2 years (more frequent valuations encouraged)
May 2015
Year-End GAAP Training
9
Calculating Net Pension Liability
Total
Pension
Liability
May 2015
Pension
Plan’s
Fiduciary
Net
Position
Year-End GAAP Training
Net
Pension
Liability
10
Calculating Net Pension Liability (cont.)
Total Pension
Liability (TPL)
• Equal to or a portion of the actuarial present value of
projected benefit payments that is attributable to past periods
of employee service.
Pension
Plan’s
Fiduciary Net
Position
• Should be determined using the same valuation methods
used by the pension plan for purpose of preparing statement
of fiduciary net position.
Net Pension
Liability (NPL)
• It is the difference between the two components above.
May 2015
Year-End GAAP Training
11
Change in Net Pension Liability
• NPL recognized in current reporting period less NPL recognized in
prior reporting period
• The change resulting from service cost, interest in TPL, effects of
benefit changes, projected earnings on plan investments are
recognized as pension expense.
• Exceptions:
• Difference between expected and actual experience (TPL)
• Changes of assumptions (TPL)
• Difference between projected and actual earnings on pension plan
investments
• Employer contributions
May 2015
Year-End GAAP Training
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Changes in NPL – TPL exceptions
• Expense recognized in current and future periods
• Portion not recognized in expense are in
deferred outflow/inflow of resources related to
pensions
May 2015
Year-End GAAP Training
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Changes in NPL – Investment Earnings Exception
• Expense recognized in current and future periods
• Portion not recognized in expense are in deferred
outflow/inflow of resources related to pensions
• Report net deferred outflow/inflow of resources
related to pensions
May 2015
Year-End GAAP Training
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Net Pension Liability – Employer Contribution
• Contributed during the measurement period
o Directly reduce NPL (no expense impact)
• Subsequent to measurement date
o Deferred outflow of resources related to pension
o Directly reduce NPL in the next reporting period
(no expense impact)
May 2015
Year-End GAAP Training
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Special Consideration: Cost-Sharing Employers
• Determine the proportionate share (%) using a basis and
consistently apply from period to period.
• Net effect of change in proportion
• Difference between:
o Employer’s proportionate share of total employer
contributions
o Actual contributions during the measurement period
• Employer’s contributions subsequent to measurement
date
May 2015
Year-End GAAP Training
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Note Disclosures
• Descriptive information of the Pension Plan
• Significant assumptions/other inputs used in determining
TPL
• Information on pension plan’s fiduciary net position or
reference to the plan report or link to the public website
where it is posted
• Relevant dates, i.e. actuarial valuation and measurement
dates
• Changes in the assumptions/other inputs and changes in
benefit terms
• Changes subsequent to measurement date
May 2015
Year-End GAAP Training
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Note Disclosures (cont.)
• Pension expense in current reporting
period
• Deferred outflows/inflows of resources – by
source, net impact on pension expense in
each of the next 5 years, and thereafter in
aggregate, and amount that will reduce
NPL
May 2015
Year-End GAAP Training
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Note Disclosures (cont.)
Cost-sharing employers only:
• Employer’s proportionate share, basis and
change in proportion
• Employer’s proportionate share (in $) of
collective NPL.
• Non-employer contributing entity’s proportionate
share (in % and $), if applicable
May 2015
Year-End GAAP Training
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Required Supplementary Information
• 10-year schedules
• Employer’s proportion (%), proportionate
share (amount) of collective NPL, coveredemployee payroll, proportionate share as % of
covered-employee payroll, pension plan’s net
position as % of TP
• Notes to RSI with significant changes
May 2015
Year-End GAAP Training
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Defined Contribution Pension
• Pension expense for amounts defined by benefit terms as
attributable to the reporting period
– Net of forfeited amounts removed from employee accounts
• Liability for difference between pension expense and
contributions
• Note disclosures
– Descriptive information about plan, benefit terms,
contribution rates, amount of expense, amount of forfeitures,
amount of liability
• Non-employer contributing entities with legal requirements to
contribute directly to pension plan also addressed
May 2015
Year-End GAAP Training
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Reminders for Successful Implementation
• Determine the pension plan type as early as
possible, consult with legal counsel if needed.
• Identify individuals that will be focused on the
implementation and gathering information.
• Form a timeline for implementation.
• Prepare for the increased note disclosures.
• Work closely with auditors
May 2015
Year-End GAAP Training
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CSU SW GAAP Reporting Requirement
• Despite the new accounting and disclosure
requirements, the audited financials are expected to
be final by September 18th.
• Use the supplemental information template in
Chapter 8 of the GAAP Manual which was updated
to include pension related accounts.
• No specific footnote disclosures have been added to
the template. Wait for further instructions.
May 2015
Year-End GAAP Training
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Knowledge Check Question
Which of the following is a criteria in determining
whether a pension plan is within the scope of
GASB 68?
a)
b)
c)
d)
Employer/non-employer contributions irrevocable
Plan assets are dedicated to providing pensions
Plan assets are legally protected from creditors
All of the above
May 2015
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www.calstate.edu
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