Florida Government Finance
Officers Association Webinar
GASB’s New Pension Standards
December 18, 2014
Florida Retirement System
and
Health Insurance Subsidy Program
Garry Green
Chief, Bureau of Research and Member Communications
Division of Retirement
Department of Management Services
Garry.Green@dms.myflorida.com
FRS MEMBERSHIP DATA
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Pension Plan Membership by Employer Group
3.8%
3.0%
4.7%
50.3%
School Districts
257,891 members
$10.0 billion payroll
County Governments
115,922 members
$5.8 billion payroll
15.6%
State
79,819 members
$3.1 billion payroll
Cities & Special Districts
23,816 members
$1.2 billion payroll
State Universities
19,276 members
$0.9 billion payroll
Community Colleges
15,640 members
$0.7 billion payroll
22.6%
Fiscal Year 2013-14
Total Pension Plan Members - 512,364
Actual Payroll - $21,552,542,347
As of June 30, 2014
Investment Plan Membership by Employer Group
4.8%
5.1%
44.8%
4.9%
School Districts
49,095 members
$1.8 billion payroll
County Governments
23,833 members
$1.2 billion payroll
State
20,534 members
$0.9 billion payroll
Cities & Special Districts
5,373 members
$0.3 billion payroll
18.7%
State Universities
5,617 members
$0.2 billion payroll
Community Colleges
5,273 members
$0.2 billion payroll
Fiscal Year 2013-14
Total Investment Plan Members - 109,725
Actual Payroll - $4,589,868,836
21.7%
As of June 30, 2014
DROP Participants by Employer Group
3.8%
3.0%
4.7%
47.3%
School Districts
18,015 members
$986 million payroll
County Governments
8,828 members
$572 million payroll
State
6,878 members
$336 million payroll
15.6%
Cities & Special Districts
1,518 members
$98 million payroll
State Universities
1,605 members
$93 million payroll
Community Colleges
1,214 members
$74 million payroll
Fiscal Year 2013-14
Total Pension Plan Members - 38,058
Actual Payroll - $2,158,869,851
22.6%
DROP Payouts
As of June 30, 2014
$867,509,256
Retired Membership Data – All Systems
Annuitants and Benefit Payments
As of June 30, 2014
Number of Annuitants
Average Annual Benefit
Average Age At Retirement for
Fiscal Year 2013 -14
Average Age of All FRS Retirees
Average Years of Creditable Service
363,034
$19,765
61.19
69.92
20.96
Annualized Retirement Benefit Payments
July 1, 2013 – June 30, 2014
$7.18 Billion
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Health Insurance Subsidy Program (HIS)
• Based on the member’s total years of service at retirement with a minimum
monthly benefit of $30 and a maximum of $150.
• Available to Pension Plan members or eligible beneficiaries upon retirement.
• Available to Investment Plan members after retirement who:
o Meet the Pension Plan vesting requirement depending upon the member’s
first enrollment date.
o Meet normal retirement based on Pension Plan normal retirement
depending upon the member’s first enrollment date.
• Surviving spouses are eligible for a continuing benefit.
• Funded by a 1.26 percent employer contribution rate for the 2014-15 Fiscal Year.
Benefit payments began exceeding contributions in the 2009-10 year.
HIS Recipients
as of June 30, 2014
HIS Payments
July 1, 2013 – June 30, 2014
323,098
$407,275,857
2008 – 2013 FRS EXPERIENCE STUDY
AND
2014 FRS VALUATION
ASSUMPTIONS CONFERENCE RESULTS
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FRS Experience Study and Assumption Changes
The FRS has an experience study performed every five years to
keep long-term goals in line with actual experience.
The 2008-2013 FRS Experience Study results and economic
assumption changes adopted by the FRS Assumptions Conference
will be incorporated into 2014 FRS Valuation.
Key updated assumptions include:
–Mortality
–Timing of retirement or DROP entry
–Incidence of disability
–Assumed annual leave available at time of retirement
–Payroll growth assumption reduced from 4.00% to 3.25%
 Inflation reduced from 3.00% to 2.60%
 Real payroll growth reduced from 1.0% to 0.65%
–Investment return reduced from 7.75% to 7.65%
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Recent Investment Returns
June 30, 2013
FRS Trust Fund annual return of rate - 13.12%
Market value of assets - $132 billion
June 30, 2014:
FRS Trust Fund annual return rate.- 17.40%
Market value of assets - $149 billion
September 30, 2014
FRS Trust Fund annual return rate.- 10.06%
Market value of assets - $146 billion
Source: Florida State Board of Administration
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GASB 67 AND 68 OUTLOOK
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GASB 67 and GASB 68
GASB 67 Implementation Required
for Plan Year Ending 2014
– GASB Statement 67 supersedes GASB Statement 25 for plan
level reporting. Accounting is being separated from plan
funding.
– Applies if your employer administers a retirement plan or
an early retirement program that provides monthly
benefits.
• You will require an actuary and should be working on
this requirement now.
• Your auditor’s audit requirements include your
financial statements and census data audit.
– The annual required contribution (ARC) calculation is being
replaced by actuarial determined contributions (ADC)
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GASB 67 and GASB 68
GASB 67 Implementation Required
for Plan Year Ending 2014
– The market value of assets are now referred to as Net Plan
Position.
– GASB 67 uses the Individual Entry Age Normal actuarial cost
method and market value of assets.
– GASB 27 for plan level liability reporting will use actuarial
value of assets and use the one of the following actuarial
cost methods:
• Entry age, frozen entry age, attained age, frozen
attained age, projected unit credit, or the aggregate
actuarial cost method.1
1. See
Page 6 of GASB 27.
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GASB 67 and GASB 68
GASB 67 – FRS Plan Level Reporting
– The Florida Retirement System (FRS) reporting for GASB 67 will
be handled through the Division of Retirement.
– Due to assumption changes being incorporated into 2014 FRS
Valuation, GASB 67 Net Pension Liability (NPL) will be based on
2014 FRS Valuation.
– 2014 FRS Valuation Results will Implement GASB 67 using
individual entry age normal cost method and GASB 27 (for the
last year) will use .
– GASB 27 for 2014 FRS Valuation will use ultimate entry age
normal cost method (plan actuarial cost method).
– State of Florida Auditor General will perform audit for FRS.
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GASB 67 and GASB 68
GASB 67 – FRS Pension Plan Level Reporting
– GASB 67 changes when, or if, expenses are amortized.
– Changes in total plan liability that are recognized
immediately:
•
•
•
•
Annual service cost,
Plan benefit changes,
Benefits paid, and
Interest on prior year NPL.
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GASB 67 and GASB 68
GASB 67 – FRS Pension Plan Level Reporting
– Expenses for total plan liability that are gradually
recognized over a 5-year period:
• Assumption Changes, and
• Actuarial gains and losses.
– Changes in plan net position that are recognized
immediately:
•
•
•
•
Projected investment earnings,
Actual contributions,
Benefits paid, and
Administrative expenses.
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GASB 67 and GASB 68
– Changes in plan net position by GASB statement that are deferred in-flows and out-flows:
•
GASB Comment Statement 4 defines the method to derive Plan Net Position.
•
GASB 34 as modified by GASB 65 requires debt issuance costs to be expensed in the
period that the debt was issued instead of over the life of the issue. Losses on debt
refundings are an expense but treated as deferred outflows.
•
GASB 53 covers derivatives.
•
GASB 60 covers accounting and financial reporting for service concession
arrangements.
•
GASB 63 covers reporting of deferred in-flows and deferred out-flows.
•
GASB 65 covers determination of assets and liabilities; what qualifies as deferred
in-flows and deferred out-flows.
•
GASB 68 covers net pension liability allocated.
•
GASB 69 will cover governmental merger, transfer, and consolidate of function for
plan year ending in 2015.
•
GASB 70 covers non-exchange financial guarantees.
•
GASB 71 modifies GASB 68 to mitigate transitional reporting problems in GASB 68.
– This list is not designed to be a comprehensive list, work with your auditor and your
actuary if your agency is preparing GASB 67 reporting.
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GASB 67 FRS PRELIMINARY DATA
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GASB 67 FRS PRELIMINARY DATA
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GASB 67 FRS PRELIMINARY DATA
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GASB 67 FRS PRELIMINARY DATA
Schedule of Changes in Net Pension Liability and Related Ratios
Builds Out to a 10-year schedule (Cost in 1,000,000s)
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GASB 67 FRS PRELIMINARY DATA
Sensitivity Analysis
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GASB 67 FRS PRELIMINARY DATA
25
GASB 67 FRS PRELIMINARY DATA
Calculation of Money-Weighted Return
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GASB 68 - FRS Financial Reporting for Pensions
Implementation Required for Plan Year Ending in 2015
– Net Pension Liability (NPL) must be developed using the audited
financial statements and will be allocated to FRS participating
employers on the percentage of their reported payroll as a
percentage of the total payroll base.
– Actuarial cost method used for GASB 68 reporting is individual
entry age normal cost method.
– Actuarial cost method used in the valuation for pension funding
is ultimate entry age normal cost method (plan cost basis).
– State of Florida Auditor General will perform audit for FRS and
has retained an actuary to assist them.
– The Office of Program Policy and Government Accountability has
the valuation reviewed for compliance and is retaining a different
actuary to assist them.
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GASB 68 - FRS Financial Reporting for Pensions
2015 – GASB 68 NPL Allocation
Preliminary:
– The NPL will be calculated only on a June 30 basis.
– The employer must account for its deferred in-flows and out-flows
from the measurement date and the reporting date. The reporting
date must be within 12 months of the measurement date.
– For employers with September 30 year end, the 2014 valuation
liabilities will be rolled forward to June 30, 2015 and use audited 2015
assets (fiduciary plan net position) with a June 30 measurement date.
– For employers with June 30 year end, measurement date will be June
30, 2014, using the 2014 audited assets.
– The Florida Auditor General will audit the financials and the cohort
census data of the FRS supplemented by the Division of Retirement’s
Audit Compliance Staff.
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GASB 68 - FRS Financial Reporting for Pensions
2015 – GASB 68 NPL Allocation
Preliminary:
– The NPL will be allocated based on the reported
employer payroll as a percentage of total FRS Pension
Plan payroll to be consistent with the manner in which
contributions are reported to the division.
– The allocation will be to the employer in aggregate for all
membership classes, not on an individual membership
class basis.
– An employer reporting other employers or component
units must further allocate its NPL allocation.
– The NPL allocation and required pension disclosures and
footnotes will be posted to the Division of Retirement’s
website after the 2015 financial audit is completed.
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GASB 68 - FRS Financial Reporting for Pensions
2015 – GASB 68 NPL Allocation
Preliminary:
– The Retiree Health Insurance Subsidy Program (HIS) is deemed a
pension plan for GASB reporting purposes.
 Program eligibility is based on insurance coverage but the
benefit is paid as a fungible dollar payment (not a direct
reduction before premium payment by member).
– The discount rate will be based on Bond Buyer General Obligation
20-Bond Municipal Bond Index – 4.22% at June 30, 2014.
– The payroll basis for HIS is broader than the FRS Pension Plan
payroll. For example, includes reemployed retirees without
renewed membership.
– The allocation will be developed and shared similar to the liability
for the FRS Pension Plan.
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Glossary
31
Glossary
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Contact Information
Garry Green
Chief, Bureau of Research and Member Communication
Division of Retirement
Department of Management Services
850-414-6349
Garry.Green@dms.myflorida.com
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