October 8, 2015
Comments Due: November 16, 2015
Proposed Statement
of the Governmental Accounting Standards Board
Accounting and Financial Reporting for
Pensions Provided through
Certain Multiple-Employer Defined
Benefit Pension Plans
an amendment of GASB Statement No. 68
This Exposure Draft of a proposed Statement of
Governmental Accounting Standards is issued by the Board for
public comment. Written comments should be addressed to:
Director of Research and Technical Activities
Project No. 34-3E
ACCOUNTING AND FINANCIAL REPORTING FOR PENSIONS
PROVIDED THROUGH CERTAIN MULTIPLE-EMPLOYER
DEFINED BENEFIT PENSION PLANS
WRITTEN COMMENTS
Deadline for submitting written comments: November 16, 2015
Requirements for written comments. Comments should be addressed to the Director of
Research and Technical Activities, Project No. 34-3E, and emailed to director@gasb.org or
mailed to the address below.
OTHER INFORMATION
Public hearing. The Board has not scheduled a public hearing on the issue addressed in
this Exposure Draft.
Public files. Written comments will become part of the Board’s public file and are posted
on the GASB’s website.
Orders. This Exposure Draft may be downloaded from the GASB’s website at
www.gasb.org. For information on prices for printed copies, please contact the Order
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Norwalk, CT 06856-5116
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Please ask for our Product Code No. GE100.
GASB publications also may be ordered at www.gasb.org.
____________________
Copyright © 2015 by Financial Accounting Foundation. All rights reserved. Permission is
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Notice to Recipients
of This Exposure Draft
The Governmental Accounting Standards Board (GASB) is responsible for
establishing and improving standards of state and local governmental accounting and
financial reporting to provide useful information to users of financial reports and to educate
stakeholders—including issuers, auditors, and users of those financial reports—on how to
most effectively understand and implement those standards.
The due process procedures that we follow before issuing our standards and other
communications are designed to encourage broad public participation in the standardssetting process. As part of that due process, we are issuing this Exposure Draft setting forth
a proposed Statement that would amend requirements for accounting and financial reporting
for pensions provided through certain multiple-employer defined benefit pension plans.
We invite your comments on all matters in this proposed Statement. Because this
proposed Statement may be modified before it is issued as a final Statement, it is important
that you comment on any aspects with which you agree as well as any with which you
disagree. To facilitate our analysis of comment letters, it would be helpful if you explain
the reasons for your views, including alternatives that you believe the GASB should
consider.
All responses are distributed to the Board and to staff members assigned to this
project, and all comments are considered during the Board’s deliberations leading to a final
Statement. In deciding on changes in accounting and financial reporting standards, the
GASB also takes into consideration the costs of preparing and reporting the information
and its benefits to users of financial statements. When the Board is satisfied that all
alternatives have adequately been considered, and modifications have been made as
considered appropriate, a vote is taken on the Statement. A majority vote is required for
adoption.
ii
Summary
The objective of this proposed Statement is to address a practice issue regarding the
scope and applicability of Statement No. 68, Accounting and Financial Reporting for
Pensions. This issue relates to pensions provided through certain multiple-employer defined
benefit pension plans and state or local governmental employers whose employees are
provided with such pensions.
The requirements of Statement 68 apply to the financial statements of all state and
local governmental employers whose employees are provided with pensions through
pension plans that are administered through trusts that meet the criteria of paragraph 4 of
that Statement.
This proposed Statement would amend the scope and applicability of Statement 68 to
exclude pensions provided to employees of state or local governmental employers through
a cost-sharing multiple-employer defined benefit pension plan that (1) is not a state or local
governmental pension plan, (2) is used to provide defined benefit pensions to employees of
employers that are not state or local governmental employers, and (3) has no predominant
state or local governmental employer (either individually or collectively with other state or
local governmental employers that provide pensions through the pension plan). This
proposed Statement would establish requirements for recognition and measurement of
pension expense/expenditures and liabilities, note disclosures, and required supplementary
information for pensions that have the characteristics described above.
Effective Date
The requirements of this proposed Statement would be effective for reporting periods
beginning after December 15, 2015. Earlier application would be permitted.
Unless otherwise specified, pronouncements of the GASB apply to financial reports of all
state and local governmental entities, including general purpose governments; public
benefit corporations and authorities; public employee retirement systems; and public
utilities, hospitals and other healthcare providers, and colleges and universities. Paragraph 3
discusses the applicability of this Statement.
iii
Proposed Statement of the Governmental Accounting Standards Board
Accounting and Financial Reporting for Pensions Provided through
Certain Multiple-Employer Defined Benefit Pension Plans
an amendment of GASB Statement No. 68
October 8, 2015
CONTENTS
Paragraph
Numbers
Introduction ....................................................................................................................... 1
Standards of Governmental Accounting and Financial Reporting ............................... 2–9
Scope and Applicability .......................................................................................... 2–4
Recognition and Measurement in Financial Statements Prepared
Using the Economic Resources Measurement Focus and
Accrual Basis of Accounting .................................................................................... 5
Recognition and Measurement in Financial Statements Prepared
Using the Current Financial Resources Measurement Focus and Modified
Accrual Basis of Accounting .................................................................................... 6
Notes to Financial Statements ..................................................................................... 7
Required Supplementary Information.....................................................................8–9
Notes to the Required Schedule ............................................................................9
Effective Date and Transition ................................................................................... 10–11
Glossary .......................................................................................................................... 12
Appendix A: Background ....................................................................................... A1–A3
Appendix B: Basis for Conclusions ...................................................................... B1–B11
Appendix C: Codification Instructions .......................................................................... C1
iv
Proposed Statement of the Governmental Accounting Standards Board
Accounting and Financial Reporting for Pensions Provided through
Certain Multiple-Employer Defined Benefit Pension Plans
an amendment of GASB Statement No. 68
October 8, 2015
INTRODUCTION
1.
During the implementation of Statement No. 68, Accounting and Financial Reporting
for Pensions, an issue arose regarding the ability of state and local governmental employers
to obtain necessary information related to pensions1 that are provided through certain
multiple-employer defined benefit pension plans. The objective of this Statement is to
address that issue.
STANDARDS OF GOVERNMENTAL ACCOUNTING AND
FINANCIAL REPORTING
Scope and Applicability
2.
This Statement establishes accounting and financial reporting standards for defined
benefit pensions provided to the employees of state or local governmental employers
through a cost-sharing multiple-employer defined benefit pension plan (cost-sharing
pension plan) that meets the criteria in paragraph 4 of Statement 68 and that (a) is not a
state or local governmental pension plan, (b) is used to provide defined benefit pensions to
employees of employers that are not state or local governmental employers, and (c) has no
predominant state or local governmental employer (either individually or collectively with
other state or local governmental employers that provide pensions through the pension
plan).
3.
The requirements of this Statement apply to the financial statements of state and local
governmental employers whose employees are provided with defined benefit pensions
through cost-sharing pension plans that have the characteristics described in paragraph 2.
The requirements apply whether the government’s financial statements are presented in
stand-alone financial reports or are included in the financial reports of another government.
4.
1
This Statement amends Statement 68, paragraphs 4, 5, and 13.
Terms defined in the Glossary are shown in boldface type the first time they appear in this Statement.
1
Recognition and Measurement in Financial Statements Prepared Using
the Economic Resources Measurement Focus and Accrual Basis of
Accounting
5.
Pension expense should be recognized equal to the employer’s required contributions
to the pension plan for the reporting period. A payable should be recognized equal to the
difference at the end of the reporting period between contributions required and
contributions made.
Recognition and Measurement in Financial Statements Prepared Using
the Current Financial Resources Measurement Focus and Modified
Accrual Basis of Accounting
6.
Pension expenditures should be recognized equal to the employer’s required
contributions to the pension plan that are associated with the pay periods within the
reporting period. A payable should be recognized to the extent it is normally expected to be
liquidated with expendable available financial resources (that is, for the unpaid required
contributions that are associated with the pay periods within the reporting period).
Notes to Financial Statements
7.
For each cost-sharing pension plan that has the characteristics described in
paragraph 2 through which the employer provides pensions, the following should be
disclosed:
a.
b.
c.
d.
Name of the pension plan, identification of the entity that administers the pension
plan, and identification of the pension plan as a cost-sharing pension plan that has the
characteristics described in paragraph 2
Whether the pension plan issues a publicly available financial report and, if so, how
to obtain the report
A brief description of the benefit terms, including:
(1) The number of the government’s employees covered
(2) The types of benefits provided
(3) The authority under which benefit terms are established or may be amended
A brief description of contribution requirements, including:
(1) The basis for determining the employer’s contributions to the pension plan (for
example, pursuant to a collective-bargaining agreement)
(2) Identification of the authority under which contribution requirements of the
employer and its employees are established or may be amended
(3) The required contribution rates of the employer and its employees for the
reporting period
(4) The amount, in dollars, of the employer’s required contributions for the
reporting period
(5) The expiration date(s) of collective-bargaining agreement(s) requiring
contributions to the pension plan, if any
2
(6)
e.
A description of any minimum contributions required for future periods by the
collective-bargaining agreement(s), statutory obligations, or other contractual
obligations, if applicable
(7) Whether the employer is subject to any provisions regarding withdrawal from
the pension plan
If not otherwise identifiable, the balance of payables, if any, resulting from unpaid
contributions to the pension plan.
Required Supplementary Information
8.
A schedule of the employer’s required contributions for each of the 10 most recent
fiscal years should be presented as required supplementary information. The schedule
should separately identify amounts associated with each pension plan.
Notes to the Required Schedule
9.
Information about factors that significantly affect trends in the amounts reported (for
example, changes in the size of the population covered by the benefit terms or changes in
required contribution rates) should be presented as notes to the schedule required by
paragraph 8.
EFFECTIVE DATE AND TRANSITION
10. The requirements of this Statement are effective for reporting periods beginning after
December 15, 2015. Earlier application is permitted.
11. Accounting changes adopted to conform to the provisions of this Statement should be
applied retroactively by restating financial statements, if practical, for all prior periods
presented. If restatement for prior periods is not practical, the cumulative effect, if any, of
applying this Statement should be reported as a restatement of beginning net position (or
fund balance or fund net position, as appropriate) for the earliest period restated. In the first
period that this Statement is applied, the notes to the financial statements should disclose
the nature of the restatement and its effect. Also, the reason for not restating prior periods
presented should be disclosed.
The provisions of this Statement need
not be applied to immaterial items.
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GLOSSARY
12. This paragraph contains definitions of certain terms as they are used in this Statement;
the terms may have different meanings in other contexts.
Cost-sharing multiple-employer defined benefit pension plan (cost-sharing pension
plan)
A multiple-employer defined benefit pension plan in which the pension obligations to
the employees of more than one employer are pooled and pension plan assets can be
used to pay the benefits of the employees of any employer that provides pensions
through the pension plan.
Defined benefit pensions
Pensions for which the income or other benefits that the employee will receive at or
after separation from employment are defined by the benefit terms. The pensions may
be stated as a specified dollar amount or as an amount that is calculated based on one or
more factors such as age, years of service, and compensation.
Multiple-employer defined benefit pension plan
A defined benefit pension plan that is used to provide pensions to the employees of more
than one employer.
Pension plan
An arrangement through which pensions are determined, assets dedicated for pensions
are accumulated and managed, and benefits are paid as they come due.
Pensions
Retirement income and, if provided through a pension plan, postemployment benefits
and other retirement income (such as death benefits, life insurance, and disability
benefits). Pensions do not include postemployment healthcare benefits and termination
benefits.
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Appendix A
BACKGROUND
A1. Statement 68, approved in June 2012, establishes accounting and financial reporting
requirements for pensions provided to the employees of state or local governmental
employers through pension plans that are administered through trusts that meet the criteria
in paragraph 4 of that Statement. The requirements of Statement 68 became effective for
fiscal years beginning after June 15, 2014.
A2. Since the issuance of Statement 68, concerns have been raised by stakeholders
regarding the scope and applicability of Statement 68 regarding pensions provided through
certain multiple-employer defined benefit pension plans (for example, certain cost-sharing
pension plans that are not state or local governmental plans, such as Taft-Hartley plans and
plans that have similar characteristics) and to state and local governmental employers whose
employees are provided with such pensions. Specifically, stakeholder concerns have
focused on the inability of those employers to obtain the measurements and other
information needed to comply with the requirements of Statement 68 due to the nature of a
governmental employer’s involvement in and relationship with the pension plan.
A3. In July 2015, the Board added a project to its current technical agenda to address this
issue along with certain other issues raised during the implementation of Statement 68.
However, based on additional stakeholder feedback, the Board subsequently concluded that
the issue that is addressed in this project should be considered separately from the other
issues and on an accelerated timeline so that affected employers potentially would be able
to apply the requirements of this Statement to their financial statements in the required
initial year of implementation of Statement 68. Therefore, the Board added a separate
project to the practice-issues portion of the GASB’s current technical agenda in September
2015 to address the issues related to pensions provided through certain multiple-employer
defined benefit pension plans.
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Appendix B
BASIS FOR CONCLUSIONS
B1. This appendix discusses factors considered significant by Board members in reaching
the conclusions in this Statement. It includes discussion of the alternatives considered and
the Board’s reasons for accepting some and rejecting others. Individual Board members
may have given greater weight to some factors than to others.
Scope and Applicability
B2. Based on technical inquiries received and formal requests submitted by stakeholders,
the Board believes there are significant challenges associated with obtaining the information
needed to comply with Statement 68 in circumstances in which pensions are provided to
the employees of state or local governmental employers through certain multiple-employer
defined benefit pension plans (as defined by this Statement). In those circumstances,
obtaining the measurements and other information required by Statement 68 is not feasible
due to the relationship between the employer and the pension plan. That is, the nature of a
government’s involvement as an employer in the arrangement prevents coordination with
the pension plan. Those types of pension plans generally are not established specifically for
the employees of a government, and the governmental employers typically are only a small
subset of all employers that provide pensions through the pension plan. Therefore, the Board
concluded that (a) the scope and applicability of Statement 68 should be amended to exclude
pensions provided through certain multiple-employer defined benefit pension plans and
employers whose employees are provided with such pensions and (b) those employers
should apply the requirements of this Statement.
B3. The Board concluded that the scope of Statement 68 should exclude (and the scope of
this Statement should include) defined benefit pensions provided to employees of state or
local governmental employers through a cost-sharing defined benefit pension plan that
(a) is not a state or local governmental pension plan, (b) is used to provide defined benefit
pensions to employees of employers that are not state or local governmental employers, and
(c) has no predominant state or local governmental employer (either individually or
collectively with other state or local governmental employers that provide pensions through
the pension plan). In defining these characteristics, the Board focused on whether it is
reasonable to expect an employer to be able to coordinate with the pension plan to obtain
information. For example, the Board concluded that this Statement only should apply to
employers that provide pensions through multiple-employer pension plans because, in its
view, if the state or local government is the only employer in the pension plan, it is
reasonable to expect the employer to coordinate with the pension plan to obtain information,
regardless of whether the pension plan itself is a state or local government. With respect to
the characteristic regarding whether there is a predominant state or local governmental
employer, the Board made similar conclusions—if there is a predominant state or local
governmental employer, or if state or local governmental employers collectively are
predominant, it is reasonable to expect coordination to obtain information due to the level
of involvement of state or local governmental employers.
6
Recognition and Measurement
B4. As previously discussed, the Board recognizes the practical concerns about obtaining
the information required by Statement 68 in the circumstances described in paragraph B3.
However, the Board concluded that employers in those circumstances should be required to
report information about providing pensions to their employees through those types of
pension plans. With respect to pension expense and expenditures, the Board concluded that
the requirement in Statement No. 27, Accounting for Pensions by State and Local
Governmental Employers, to recognize pension expense and expenditures equal to the
amount of required contributions is the only information available to employers that
provides some understanding of the transactions related to pensions. With respect to the
recognition of a liability, the Board noted that employers in those circumstances are unable
to apply the requirements of Statement 68 for recognition of a net pension liability.
Therefore, the Board concluded that the only liability to be recognized is a payable resulting
from the difference between required contributions and contributions made.
B5. The Board also considered whether requirements should be included in this Statement
for circumstances in which the employer may have an obligation to the pension plan for a
portion of the unfunded liability upon exit from the pension plan (generally referred to as a
withdrawal liability). The Board concluded that the requirements for loss contingencies in
Statement No. 62, Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, would apply. In
addition, the Board concluded that a disclosure should be made in the notes to the financial
statements with respect to whether the employer is subject to any provisions regarding
withdrawal from the pension plan.
Notes to Financial Statements
B6. The Board evaluated potential note disclosure requirements in the context of the
guidance in Concepts Statement No. 3, Communication Methods in General Purpose
External Financial Reports That Contain Basic Financial Statements. Concepts
Statement 3 states that “notes to financial statements are integral to financial statements and
are essential to a user’s understanding of financial position or inflows and outflows of
resources” (paragraph 35). The Board concluded that the notes to financial statements
should include basic, descriptive information that is similar to those note disclosures
required by Statement 68, including information about required contributions. This
information, together with information about collective-bargaining agreements (if any) and
the existence of provisions related to withdrawal from the pension plan, is essential to a
user’s understanding of amounts required to be reported in the financial statements.
Required Supplementary Information
B7. This Statement requires presentation of a schedule of the employer’s required
contributions for the 10 most recent fiscal years. The Board concluded that this information
would provide historical context for the employer’s current-year required contribution.
7
Considerations Related to Benefits and Costs
B8. The overall objective of financial reporting by state and local governments is to
provide information that assists financial statement users (the citizenry, legislative and
oversight bodies, and investors and creditors) in assessing the accountability of
governments and in making economic, social, and political decisions. One of the principles
guiding the Board’s setting of standards for accounting and financial reporting is the
assessment of expected benefits and perceived costs. The Board strives to determine that its
standards (including disclosure requirements) address a significant user need and that the
costs incurred through the application of its standards, compared with possible alternatives,
are justified when compared to the expected overall public benefit.
B9. As previously discussed, this Statement addresses a practice issue that prevented
governments from reporting their involvement in certain types of arrangements. The Board
believes that the expected benefits—greater comparability and consistency, and increased
transparency—that will result from the information required by this Statement will not
result in significant additional cost, because the Board believes that much of the information
necessary to comply with this Statement already is available to governments or would not
require extensive effort to obtain. The Board believes that the significance of
postemployment benefits as a whole among state and local governments underlines the
importance of providing information about these arrangements.
Effective Date and Transition
B10. The Board concluded that this Statement should be effective as soon as possible in
order to address concerns raised by stakeholders in a timely manner and potentially to allow
for preparers to apply this Statement concurrently with the required initial year of
implementation of Statement 68. Therefore, the Board concluded that this Statement should
be effective for reporting periods beginning after December 15, 2015, with earlier
application permitted.
B11. With respect to transition requirements, the Board concluded that it is appropriate to
require retroactive application of the provisions of this Statement, to the extent practical.
For the 10-year schedule of required supplementary information, the Board concluded that
no additional provisions are needed because the information in the schedule should be
available to be presented for the full 10 years in the initial year of implementation.
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Appendix C
CODIFICATION INSTRUCTIONS
C1. The section that follows updates the June 30, 2015 Codification of Governmental
Accounting and Financial Reporting Standards (Codification) for the effects of the
provisions of this Statement. Only the paragraph number of the Statement is listed if the
paragraph will be cited in full in the Codification.
* * *
[Update cross-references throughout.]
* * *
PENSION ACTIVITIES—REPORTING FOR BENEFITS
PROVIDED THROUGH TRUSTS THAT MEET
SPECIFIED CRITERIA
Sources:
SECTION P20
[Add GASBS XX.]
.101 [Revise sources as follows:] GASBS 68, ¶4, as amended by GASBS XX, ¶2; GASBS
XX, ¶2
[In footnote 1, add GASBS XX, fn1 to sources.]
.102 [Revise sources as follows:] GASBS 68, ¶5, as amended by GASBS XX, ¶3; GASBS
XX, ¶3
.110 [In last sentence, replace Each with Except as provided in paragraph .111, each.]
[GASBS 68, ¶13, as amended by GASBS XX, ¶2]
[Insert new paragraph .111 as follows; renumber subsequent paragraphs.]
.111 Paragraphs .224–.228 apply to employers whose employees are provided with defined
benefit pensions through a cost-sharing pension plan that (a) is not a state or local
governmental pension plan, (b) is used to provide defined benefit pensions to employees of
employers that are not state or local governmental employers, and (c) has no predominant
state or local governmental employer (either individually or collectively with other state or
local governmental employers that provide pensions through the pension plan). Each
employer that provides pensions through such a plan should apply those requirements rather
than the requirements in paragraphs .145–.180, .190–.195, and .220–.222. [GASBS XX, ¶2
and ¶3]
[Revise the heading that follows renumbered paragraph .145 as follows:] Cost-Sharing
Employers That Do Not Have the Characteristics in Paragraph .111
9
[Revise the heading that precedes renumbered paragraph .173 as follows:] Notes to financial
statements—all cost-sharing employers that do not have the characteristics in paragraph
.11116
[Revise the heading that precedes renumbered paragraph .180 as follows:] Required
supplementary information—all cost-sharing employers that do not have the characteristics
in paragraph .11118
[Revise the heading that follows renumbered paragraph .190 as follows:] Cost-Sharing
Employers That Do Not Have the Characteristics in Paragraph .111
[Revise the heading that precedes renumbered paragraph .221 as follows:] Payables to a
Defined Benefit Pension Plan—All Employers That Do Not Have the Characteristics in
Paragraph .111 and Governmental Nonemployer Contributing Entities
[Insert new paragraphs .224–.228 as follows; renumber subsequent paragraphs.]
.224–.228 [GASBS XX, ¶5–¶9, including headings]
[In paragraphs .501, .521, .522, .525, .526, .533, .537, and .539, add GASBS XX, ¶12 to
sources.]
[In the heading that precedes paragraph .601, replace Cost-Sharing Employers with CostSharing Employers That Do Not Have the Characteristics in Paragraph .111.]
.601 [Replace cost-sharing employers with cost-sharing employers that do not have the
characteristics in paragraph .111.] [GASBTB 2004-2, ¶1, as amended by GASBS 68, ¶4–
¶6, ¶73, ¶107, and ¶121 and GASBS XX, ¶3]
[In current paragraphs .701–.797, revise headings to correspond to headings in paragraphs
.101–.240.]
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