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Upcoming GASB Changes

Upcoming GASB Changes. Presented by Darla Iverson Glenna Musselman Chief Financial Officer Senior Accountant. July 25, 2013. GASB stands for… G overnmental A ccounting S tandards B oard

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Upcoming GASB Changes

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  1. Upcoming GASB Changes • Presented by • Darla Iverson Glenna Musselman • Chief Financial Officer Senior Accountant July 25, 2013

  2. GASB stands for… Governmental Accounting Standards Board To learn more about GASB, go to the GASB website at www.gasb.org. What Is GASB?

  3. New Accounting Standards • Two new GASB statements • Statement No. 67 applies to the PLAN. • IPERS’ fiscal year 2014 • Statement No. 68 applies to EMPLOYERS who utilize GAAP reporting. • The fiscal year that begins after 6/15/2014

  4. Breaking the Link • Currently actuarial valuation numbers used for accounting and funding purposes. • Funding measures still valid and essential but no longer reported in financial reports. • The new standards change the way public pension obligationsare reported in financial reports. • Accounting and funding are no longer linked.

  5. Financial Numbers Total pension liability (TPL): actuarial present value of projected benefit payments allocated during past periods of employee service. Net pension liability (NPL):TPL minus market value of assets. Pension expense (PE):the difference between the NPL from the prior fiscal year to the current fiscal year, with some adjustments.

  6. Total Pension Liability What is total pension liability? Similar to actuarial accrued liability in the valuation, but may use a different discount rate. What will IPERS do with this number? It will be disclosed in our CAFR and Required Supplementary Information (RSI).

  7. Discount Rate Discount rate The actuarial assumed investment return, set by the Investment Board, is currently used for both accounting and funding purposes. Blended rate This is a new discount rate for financial reporting used when the projected net assets are NOT sufficient to cover projected benefit payments. It is a blended rate using the actuarial assumed investment return and a 20-year municipal bond index rate.

  8. Net Pension Liability What is net pension liability? TPL minus market value of IPERS’ assets = NPL What will IPERS do with this number? This will be apportioned among the employers and reported on their financial statements.

  9. Pension Expense What is pension expense? The difference in NPL from the previous year to the current year, with some adjustmentsthe calculations will take into account. What is done with this number? This will be apportioned among the employers and reported on their financial statements.

  10. Employer Allocation • IPERS is a multiple-employer, cost-sharingpension plan. • There are over 2,100 participating employers. • Under the new standards, each employer utilizing GAAP reporting will record their share of the net pension liability and pension expense based on their proportion of contributions paid to IPERS.

  11. Proportionate Shares Collective NPL = $1,000 This example shows how the collective NPL and PE are apportioned among the employers based on the percentage of contributions made by each employer compared to total contributions. $120 $330 $140

  12. Employers’ Responsibilities • Employers will have to recognize their share of the net pension liability (NPL). • And a new measure of the pension expense (PE) on their financial statements. This is NEW and IMPORTANT:

  13. Employers’ Responsibilities Additional notes and disclosures will be required. Some of the new Notes include: • Expanded pension plan description • Information about employer’s proportionate share of NPL

  14. Employers’ Responsibilities RSI and Notes to RSI • 10-year schedules • Employer’s proportionate share of NPL • Contributions paid compared to contributions required • Information about significant changes/trends • Build schedules prospectively

  15. What This Means… • A pension liability on the employer’s financial statements. • Current standards require pension liability only if contractual contributions not paid. • A pension expense different from the current expense of contributions paid. Contributions are determined by actuarial methods, not accounting standards.

  16. Education & Outreach For employers • The Latest Word newsletter • Reporting officials training • Office of Auditor of State • Presentation to the School Administrators of Iowa (SAI) - Aug. 7 and Aug. 14 • Presentation to the Iowa Association of School Board Officials (IASBO) – Sept. 26

  17. Questions? • If you have questions about this presentation, please send them to: employerrelations@ipers.org • We will do our best to provide you with the information you need.

  18. Stay Tuned! Additional online resources • GASB: www.gasb.org • NIRS: www.NIRSonline.org • GFOA: www.GFOA.org • Gabriel Roeder Smith & Company: www.gabrielroeder.com • Cavanaugh Macdonald Consulting: www.CavMacConsulting.com

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