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Agenda •
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New Standards for Pension Plan Financial Reporting -
Statement No. 67
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Statement No. 68
Exposure Drafts for OPEB Plan Financial Reporting
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Overview of New Pension Accounting Standards •
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GASB 67 -
Accounting and reporting for the plan by the plan
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Replaces GASB 25
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Effective for fiscal year beginning after 6/15/2013
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Can roll forward liabilities from actuarial valuation no more than 24 months earlier than measurement date
GASB 68 -
Accounting and reporting for the plan by the plan sponsor
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Replaces GASB 27
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Effective for fiscal year beginning after 6/15/2014
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Can roll forward liabilities from actuarial valuation no more than 30 months and 1 day earlier than measurement date
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Highlights of GASB 67 and 68 •
New accounting rules do not affect plan funding
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More restrictive regarding actuarial cost method and interest rate
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Must use Entry Age Normal (EAN) with individual level-percent-of-pay
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Discount rate •
If projected assets > projected benefits: Expected return on assets
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If projected assets < projected benefits: 20-yr tax-exempt municipal bond rate
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Could be combination of two rates
Recognition of Net Pension Liability -
Total Pension Liability (EAN accrued liability) less Market Value of Assets
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Replaces Net Pension Obligation (NPO)
Other assumptions per Actuarial Standards of Practice
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Highlights of GASB 67 and 68 (cant' d) •
Components of GASB 68 Pension Expense -
Service Cost (benefits earned in current period)
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Interest Cost on Total Pension Liability (EAN accrued liability)
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Expected Return on Assets
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Changes in Net Pension Liability •
Assumption changes and liability gains/losses amortized over average expected future service of all plan participants
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Asset gains/losses amortized over 5 years
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Plan amendments immediately recognized
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Unamortized amounts classified as "deferred inflows and outflows of resources"
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Must reflect automatic COLAs in Total Pension Liability
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Highlights of GASB 67 and 68 (cant' d) •
Increased disclosures and supplementary information -
Description of plan and covered participants
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Development of discount rate and expected return on assets
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Effects on Total Pension Liability of 1% +I- change in discount rate
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Expected returns by major asset class
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Expected amortizations of deferred inflows/outflows during each of next 5 years
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10-year schedule of key measures (prospectively applied)
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Overview of OPEB Exposure Drafts •
For postemployment health care and other benefits not provided through a pension plan
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Will replace GASB 43 and 45
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Conceptually similar to GASB 67 and 68
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Target effective dates
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Plan reporting: Fiscal year beginning after 12/15/2015
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Plan sponsor reporting: Fiscal year beginning after 12/15/2016
Timing restrictions for roll-forward of liabilities from prior valuations similar to GASB 67 and 68
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Highlights of OPEB Exposure Drafts •
Total OPEB Liability -
Must use EAN with individual level-percent-of-pay cost method
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Discount rate for funded plans
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If projected assets > projected benefits: Long-term expected return
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If projected assets < projected benefits: 20-yr tax-exempt municipal bond rate
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Could be combination of two rates
Discount rate for unfunded plans •
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Recognition of Net OPEB Liability -
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20-yr tax-exempt municipal bond rate
Total OPEB Liability (EAN accrued liability) less Market Value of Assets
Other assumptions per Actuarial Standards of Practice
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Highlights of OPEB Exposure Drafts (cont'd) •
Components of OPES Expense -
Service Cost (benefits earned in current period)
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Interest Cost on Total OPEB Liability
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Expected Return on Assets
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Changes in Net OPEB Liability •
Assumption changes and liability gains/losses amortized over average expected future service of all plan participants
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Asset gains/losses amortized over 5 years
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Plan amendments immediately recognized
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Unamortized amounts classified as "deferred inflows and outflows of resources"
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Contributions and benefit payments do not directly impact expense
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Highlights of OPEB Exposure Drafts (cont'd) •
Required disclosures and supplementary information -
Description of OPEB plan and covered participants
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Health care cost trend rate
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Development of discount rate and expected return on assets
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Other significant assumptions
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Effects on Total OPEB Liability for 1% +I- change in discount rate and health care cost trend rates
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Expected amortizations of deferred inflows/outflows during each of next 5 years
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10-year schedule of key measures (prospectively applied)
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Questions?
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