James Marta CPA, CGMA, ARPM
Ken Hearnsberger, Finance Manager NBSIA
Matt Nethaway, CPA
1






Government wide will recognize pension
liability (asset)
Employers with DB pension plans
administered through irrevocable trusts
Agencies participating in CalPERS & other
California retirement systems/plans
Does not affect contributions (funding)
Net pension liability drives pension expense
Additional note disclosures and RSI
2
Unfunded Actuarial Liability (UAL) is moved from
the footnote to the Statement of Net Financial
Position
3
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

Total Pension Liability
- Plan Net Position
= Net Pension Liability
4
List of affected and new schedules

(kh)
Statement of Net Position
◦ Net pension asset/(liability)
◦ Deferred inflows or outflows

Statement of revenues and expenditures
◦ Prior period adjustment (first year)
◦ Pension expense (current year)

New required supplementary information
◦ Sources of changes in net pension liability
◦ Components of net position liability and related
ratios

Footnotes
◦ Discussion of assumptions
5
The Cash funding requirement is no longer the expense
6
7
Changes in Net Pension Liability - Sample for CAJPA
Description
Calculation of Pension Liability:
Beginning balance - Balance 6/30/14 (Change in accounting principle)
Current year adjustment
Adjusted balance of net pension liab 6/30/15
Calculation of Deferred:
Changes for Year:
Service cost
Interest
Change in net pension liability
Change in deferred restatement portion
Contributions - Employer prior year adjust out
Contributions - Employer current year
Unamortized difference between projected and actual earnings on investments
Net Investment Income
Benefit Payments, including refunds of contributions
Administrative expenses
Other Changes
Source
Actuary GASB 68 report
Actuary GASB 68 report
Actuary GASB 68 report
Pension
Liability
$ 2,953,173
(491,633)
2,461,540
Def. Outflows Def. Inflows
Actuary GASB 68 report
Actuary GASB 68 report
Actuary GASB 68 report
Employer
Employer
Employer
Actuary GASB 68 report
Actuary GASB 68 report
Actuary GASB 68 report
Actuary GASB 68 report
Actuary GASB 68 report
Ending Balances
Pension exp
(491,633)
210,446
(210,446)
225,000
210,446
(458,743)
458,743
-
225,000
(458,743)
177,556
8
Deferred
Outflow
$
-
Per general ledger before entries
A-2 Deferred Outflows of resources - 2014 Employer contributions
Net Position (prior period adjustment)
Pension liability
To adjust the beginning balance
$
$
A-3 Pension expense
Deferred outflows of resources
Pension liability
Deferred outflows of resources - 2014 employer contr. Reversal
Deferred inflows of resources - unamortized net difference
To post current year adjustments
$
$
$
210,446
2,742,728
Deferred
Inflow
$
-
Pension
Pension
Expense
Liab
$ 225,000 $
-
$ 210,446
$
2,953,173
177,556
491,633
$ 2,953,173
$
$
177,556
$ (491,633)
$
$
A-4 Deferred outflows of resources - emplyer contribution
$
225,000
Personal expenses - contribution expense
$
to adjust for employer contributions made after the measurement date 6/30/14
see what you posted to your financial statements before the adjustments; reverse into deferred
A-5 Net Pension Liability
N/A this year
$
Deferred outflows of resources
N/A this year
$
reversal of deferred employer contributions made in 2014-15 (Not for FY 2014-15 Reporting)
Calculated balances
210,446
458,743
$ (210,446)
$ (458,743)
$ 225,000
225,000
-
$ (225,000)
$
-
$ 225,000 $ (458,743) $
177,556 $ 2,461,540
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
Changes in resulting in deferred
inflows/outflows of resources:
 Effects of actuarial differences and changes in
assumptions related to economic or demographic
factors
 Differences between actual and projected earnings on
plan investments
 Employer contributions made directly by the employer
subsequent to the measurement date

The plan will report this to you. You wont
have to calculate
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Amortization due to changes in total pension
liability should be over the average of the
expected service lives of all employees
Amortization due to differences between
projected and actual earnings on investments
over five years beginning with the year in
which the difference occurred
◦ Results in the creation of “layers”, which are amortized
over closed period
◦ (New RSI schedule for disclosure)
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
Net Pension Liability
◦ The plan’s unfunded liability as of the Measurement
Date
◦ Provided by plan’s actuary based on the prescribed GASB
methods

Deferred Outflows of Resources
◦ Additional debit balances as of the Measurement Date
◦ Ex. Contributions made to the plan between the
Measurement Date and the fiscal year end

Deferred Inflows of Resources
◦ Additional credit balances as of the Measurement Date
◦ Ex. Investment gains that have not yet been recognized
in the annual expense
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13
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Changes in net pension liability between FYEs
Include a portion of deferred inflows and
outflows of resources related to pensions
(“amortization”)
◦ Actuarial (demographic) & investment gains &
losses
◦ Assumption changes
◦ Plan changes are recognized immediately
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
Allocating prior liability to your programs
◦ Could go back and calculate each year payroll by
year and program and then calculate weight
◦ If similarly allocated; weight by years of program
WC
Current year salary and wage allocation
times number of years for each programs
creates weighting
Proportionate share
Allocation of liability
$
Liab
65%
35
35.65
80%
1,043,806 $
35%
25
8.75
20%
256,194 $
44.40
100%
1,300,000
15
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Single-employer plans/single employer
Provide benefits to the employees of only one employer.

Agent multiple-employer plans/agent employer

Cost-sharing multiple-employer plans/cost-sharing
employer

Example: City of Anytown creates a pension system just for its
employees
◦ Provide benefits to more than one employer by pooling assets for
investment purposes, but legally segregating the assets to pay
benefits promised by individual employers. Essentially an agent plan
is a collection of single-employer plans.
◦ Provide benefits to more than one employer by pooling the assets
and obligations across all participating employers. As a result,
plan assets may be used to pay the benefits of any participating
employer.
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Employer Group
State of California
Schools - not teachers
Public agencies - pooled
Public agencies - nonpooled
Judges Retirement Fund
Judges II Retirement Fund
Legislatures' Retirement Fund
Reporting Classification
Agent multiple employer
Cost-sharing multiple employer
Cost-sharing multiple employer
Agent multiple employer
Single Employer
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Begin by calculating the net pension liability
at the plan level
Calculate Employers “Proportionate share”
GASB encourages the estimation of expected future
contributions as the basis to allocate; but it allows
any method that is determined on a basis that is
consistent with the manner in which required
contributions are determined.
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20
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CalPERS risk pools
Plan or risk pool’s net pension liability
calculated same as for single and agent
employers
Agency reports & recognizes proportionate
share of Plan’s or Risk Pool’s net pension
liability
◦ Any reasonable method to determine proportion
◦ Should be consistent with contribution
determination

No special treatment for Side Funds
21
Cost-sharing Multiple-Employer plans – those in which
the pension obligations to the employees of more than
one employer are pooled (plan assets can be used to pay
the benefit of the employees of any employer)

An employer should recognize its
proportionate share of the collective net
pension liability, pension expense, and
deferred inflows/outflows of a cost-sharing
plan
22

Basis for proportion should be consistent
with manner in which required contributions
are determined
As a practical matter, it is anticipated the calculation of
proportion will be performed based on either required
contributions or covered payroll
23
Proportionate share concept results in two
types of potential changes in pension liability:
 effect of a change in the employer’s proportion of the
plan’s collective net pension liability - recognized as
deferred inflow/outflow in the period of change
 difference during the measurement period between actual
plan contributions and the amount of the employer’s
proportionate share of collective contributions
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
Multiple Employer Plan
Must include “On-Behalf” payments from
state for CalSTRS
◦ Yes, the state pays part of the CalSTRS liability but
you book the whole thing
◦ You must journal in the payment as a source and a
use.
◦ CDE has a tool to assist with this calculation.
25

Amendment of Statement No. 68:
◦ par. 137……It may not be practical for some
governments to determine the amounts of all
deferred inflows of resources and deferred
outflows of resources related to pensions, as
applicable, at the beginning of the period when
the provisions of this Statement are adopted. In
such circumstances, beginning balances for
deferred inflows of resources and deferred
outflows of resources related to pensions should
not be reported.”
26

Amendment to Statement No. 68 (par. 137)
◦ Recognize a beginning deferred outflow of
resources only for its pension contributions, if
any, made subsequent to the measurement date
of the beginning net pension liability, but before
the start of the government’s fiscal year.
◦ No beginning balances for other deferred
outflows of resources and deferred inflows of
resources related to pensions should be
recognized
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Issues
Information for Employer
Reporting
Census Data
AICPA White Papers
• Government Employer Participation in
Cost-Sharing Multiple Employer Plans: Issues
Related to Information for Employer Reporting
• Single-Employer and Cost-Sharing Multiple-Employer
Plans: Issues Associated with Testing Census Data
• Substantially finalized
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Information for Employer Reporting
• Plan prepares the following for which plan auditor is engaged to provide
opinion:
1. Schedule of employer allocations
• Use allocation method based on covered payroll or required
(actual) contributions depending on whether resulting allocations
are expected to be representative of future contributions
• Projected future contributions could be used if necessary
2. Schedule of pension amounts by employer
• Includes the following elements: net pension liability, deferred
outflows of resources by category, deferred inflows of resources
by category and pension expense
• Alternative: Prepare a “schedule of collective pension amounts”
(excluding employer specific deferrals) for the plan as a whole
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Report
• Complete and accurate data to plan
• Appropriateness of information used to record financial statement
amounts
Evaluate
• Whether plan auditor’s report on schedules are adequate and appropriate
for employer purposes
• Amounts in schedules specific to employer
Verify and
recalculate
•
Employer amount used in allocation percentage (numerator)
•
Recalculate allocation percentage of employer
•
Recalculate allocation of pension amounts based on allocation
percentage of employer
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Report
•
Sufficiency and appropriateness of audit evidence
•
Whether plan auditor’s report on schedules are adequate and appropriate for auditor
purposes (i.e. evidence)
•
Review plan auditor’s report and any related modifications
•
Evaluate whether the plan auditor has necessary competence and
independence
•
Determine whether named as specified user
Amounts in schedules specific to employer
•
Employer amount used in allocation percentage (numerator)
•
Recalculate allocation percentage of employer
•
Recalculate allocation of pension amounts based on allocation percentage of
employer
Evaluate
•
Verify and
recalculate
•
Census data submitted to plan
Test
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Testing Underlying Census Data for Active Employees
• Plan auditor performs procedures to test census data maintained by the
plan
• Employer auditor performs procedures to test the census data provided
to the plan
• Census data tested should coincide with the data used in the
preparation of the actuarial report (measurement date)
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Develop a comprehensive implementation plan
Meet with finance to determine approach and timing of
allocations
Working with auditor to plan for the testing of Census Data
Draft new financial statements and disclosures
Monitor progress of implementation
Communicate implementation progress to constituent
groups/Board
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