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CHAPTER 4.3.10
GAAP ADJUSTMENTS AND RECLASSIFICATION ENTRIES
LIABILITIES: PENSION OBLIGATION
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GAAP POLICIES AND PROCEDURES
University Pension Plan
The University, as an agency of the State, contributes to California Public Employees’
Retirement System (CalPERS). The State’s plan with CalPERS is an agent multipleemployer defined-benefit pension plan and CalPERS function as an investment and
administrative agent for its members. For the University, the plan acts as a cost-sharing
multiple-employer defined-benefit pension plan, which provides a defined-benefit pension
and postretirement program for substantially all eligible University employees. The plan
also provides survivor, death, and disability benefits. Eligible employees are covered by the
Public Employee’s Medical and Hospital Care Act (PEMHCA) for medical benefits.
Employee Contribution
The University personnel are required to contribute 5.0% of their annual earnings in excess
of $513 per month to CalPERS. Effective January 1, 2013, all new employees that are
considered “new members” to CalPERS are required to contribute 50% of the normal cost
for their category (e.g. State Miscellaneous Member is 6% of their annual earnings per
month to CalPERS).
Employer Contribution
The University is required to contribute at an actuarially determined rate; the current rate for
State Miscellaneous is approximately 24.3% of annual covered payroll. The contribution
requirements of the plan members are established and may be amended by CalPERS. The
contractual maximum contribution required for the University is determined by the annual
CalPERS compensation limit(s) which are based on provisions of Assembly Bill (AB) 340
and the Internal Revenue Code (IRC) 401 (a) 17 limits.
The employer contribution pertaining to pension is recorded in the legal basis books in
FIRMS object code 603005, Retirement, which derives to GAAP account 722002, Benefits.
Recognition of Pension Obligation
Effective fiscal year 6/30/2015, GAAP requires recognition of a liability equal to the net
pension liability, which is measured as the total pension liability, less the amount of the
pension plan’s fiduciary net position.
The total pension liability is determined based upon discounting projected benefit payments
based on the benefit terms and legal agreements existing at the pension plan’s fiscal year
end. Projected benefit payments are required to be discounted using a single rate that reflects
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GAAP Manual | GAAP Adjustments and Reclassification Entries – Liabilities: Pension
Obligation | June 30, 2015
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the expected rate of return on investments, to the extent that plan assets are available to pay
benefits, and a tax-exempt, high-quality municipal bond rate when plan assets are not
available. GAAP requires that most changes in the net pension liability be included in
pension expense in the period of the change.
RELEVANT ACCOUNTING LITERATURE
In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for
Pensions, effective for the University’s fiscal year beginning July 1, 2014. This Statement
revises existing standards for employer financial statements relating to measuring and
reporting pension liabilities for pension plans provided by the University to its employees.
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OBJECTIVE OF GAAP ADJUSTMENTS
In compliance with GAAP, the University should recognize its proportionate share of the
following as of and for the year then ended:
(a) Net pension obligation
(b) Pension expense
(c) Deferred outflows of resources related to pension
(d) Deferred inflows of resources related to pension
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GAAP ACCOUNTING TREATMENT AND JOURNAL ENTRIES
4.1 GAAP ACCOUNT(S)
722002 – Benefits
712210 – Pension Obligation
711302 – Deferred Outflows – Net Pension Obligation
712302 – Deferred Inflows – Net Pension Obligation
4.2 RECOGNITION AND MEASUREMENT IN FINANCIAL STATEMENTS
4.2.1
Key Recognition and Measurement Dates
1. Fiscal Year-End
2. Measurement Date – No earlier than end of the prior fiscal year. Total Pension
Liability (TPL) and Plan Fiduciary Net Position are calculated as of this date.
3. Actuarial Valuation Date – If not the same as measurement date, as of date
should be no more than 30 months +1 day prior to fiscal year end. At least
every 2 years, more frequent valuation is encouraged. Actuarial results must
be projected forward from the valuation date to the measurement date. It must
reflect any source of material impact like legally adopted changes in the
benefit terms prior to the measurement date.
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GAAP Manual | GAAP Adjustments and Reclassification Entries – Liabilities: Pension
Obligation | June 30, 2015
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4.2.2
Recognition and Measurement – Net Pension Liability, Pension Expense,
Deferred Outflows/Inflows of Resources
The University shall recognize its proportionate share of the collective net pension
liability of the cost-sharing employers as of measurement date. The collective net pension
liability is actuarially determined by CalPERS annually. CalPERS determines the
proportionate share of the State of California (State). The State then determines the
proportionate share of the University which is further allocated to the 23 campuses and
the Office of the Chancellor.
The year-over-year change in net pension liability is usually recognized as pension
expense. Pension expense include service cost, interest in TPL, effects of benefit changes,
projected earnings on plan investments. There are exceptions to this general concept, they
are as follows:
 Difference between expected and actual experience (TPL)*
 Changes of assumptions (TPL)*
 Difference between projected and actual earnings on pension plan investments *
 Employer contributions**
*Pension expense is recognize in current and future periods. Amortization period varies
based on the type of difference/change. The portion not recognized as expense are in
deferred outflows/inflows of resources related to pensions.
** Employer contributions during the measurement period directly reduce net pension
liability (no expense impact). Employee contributions subsequent to measurement date
shall be recognized as deferred outflow of resources related to pension and directly
reduce NPL in the next reporting period (no expense impact).
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The University should recognize the proportionate share of the pension expense, and
collective deferred outflows of resources and collective deferred inflows of resources.
The determination of the proportionate share of the University is discussed in the GASB
68 implementation memo from the State, see section 5, Reference Tools, below. The
campus allocation will be provided by the CO as a passdown schedule for GAAP
reporting, see Chapter 5 of this manual.
Below is an example of the journal entry in GAAP which should be reversed in the
subsequent year.
Manual GAAP Entry (Period 998)
Account
722002
711302
712302
712210
Journal
Description
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Account Name
Benefits
Deferred outflows – Net
Pension Obligation
Deferred inflows – Net
Position Obligation
Pension Obligation
Fund
(Net Position)
Program
Class
(CSU Fund)
881-Unrestricted
20
531
$X,XXX
881-Unrestricted
90
531
$X,XXX
881-Unrestricted
90
531
($X,XXX)
881-Unrestricted
90
531
($X,XXX)
Amount
To record pension obligation as of June 30.
REFERENCE TOOLS
5.1 SCO GASB STATEMENT NO. 68 IMPLEMENTATION MEMO (PENDING)
5.2 TABLES OF OBJECT CODE AND CSU FUND DEFINITIONS
http://www.calstate.edu/SFSR/standards_and_rules/2014/Tables-of-Object-Code-andCSU-Fund-Definitions-Updated-10-30-14.xls
5.3 GASB STATEMENT NO. 68 IMPLEMENTATION GUIDE WITH Q&A
http://gasb.org/jsp/GASB/Page/GASBSectionPage&cid=1176163026371
4.3.10-4
GAAP Manual | GAAP Adjustments and Reclassification Entries – Liabilities: Pension
Obligation | June 30, 2015
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REVISION CONTROL
Document Title:
CHAPTER 4.3.10 – GAAP ADJUSTMENTS AND RECLASSIFICATION
ENTRIES – LIABILITIES: PENSION LIABILITY
REVISION AND APPROVAL HISTORY
Section(s)
Revised
General
4.3.10-5
Summary of Revisions
Revision
Date
New addition to the GAAP Manual as a result of GASB Statement
April 2015
No. 68, Pension Obligation implementation.
GAAP Manual | GAAP Adjustments and Reclassification Entries – Liabilities: Pension
Obligation | June 30, 2015