final - working through the gasb worksheets - working through the gasb... · leslie will discuss...
TRANSCRIPT
Presenters:
Working through the GASB Worksheets
• Luke Huelskamp, Municipal Employees’ Retirement System of Michigan
• Paul Niedermuller, CliftonLarsonAllen, LLP• Leslie Thompson, Gabriel, Roeder, Smith
Leslie will discuss GASB #67 and show the worksheets She will also show the excel sheets for maintaining the schedules of deferred inflows and outflows.
Paul will discuss GASB #68 with special emphasis on cost‐sharing plans
Luke will share how MERS, an agent multiple employer system, is handling GASB
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Blended discount rate (which may become a section of your CAFR)
Updated asset statements Required Supplementary Information Notes
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Payroll for Current
EmployeesPayroll for new hires
Total Employee Payroll
Contributions from current employees (a)*5%
Employer Contributions for Current Employees (a) * 10%
Contributions Related to Payroll of future
Employees (b) * 3%
Total contributions (d)+e+(f)
Year (a) (b) c (d) e (f) (g)2014 $488 $488 $24 $49 $0 $732015 $475 $34 $509 $24 $47 $1 $722016 $469 $61 $530 $23 $47 $2 $722017 $464 $89 $553 $23 $46 $3 $722018 $457 $119 $576 $23 $46 $4 $722019 $450 $151 $601 $22 $45 $5 $722020 $441 $185 $626 $22 $44 $6 $722021 $433 $220 $653 $22 $43 $7 $722022 $422 $259 $681 $21 $42 $8 $712023 $411 $299 $710 $21 $41 $9 $71etc. etc. etc. etc. etc. etc. etc. etc.
© Total payroll increases 4.25% per year(f ) Contributions for future employees above service cost can be allocated to payment of benefits of current employees
In this case, there is a 15% of pay contribution for new hires, and their service cost is 12% of paySource: GASB 67 Table 1 page 69 (numbers rounded)
Table 1‐ Projection of Contributions
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Projections Beginning Fiduciary Net Position
Projected Total Contributions
Projected Benefit
Payments
Projected Administrative
Expenses
Projected Investment Earnings
Projected Ending
Fiduciary Net Position
Year (a) (b) (c) (d) (e) (f)2014 $1,432 $73 $110 $1 $106 $1,5002015 $1,500 $72 $117 $1 $111 $1,5652016 $1,565 $72 $124 $1 $115 $1,6282017 $1,628 $72 $132 $1 $120 $1,6872018 $1,687 $72 $140 $1 $124 $1,7422019 $1,742 $72 $149 $1 $128 $1,7912020 $1,791 $72 $158 $1 $131 $1,8352021 $1,835 $72 $168 $1 $134 $1,8712022 $1,871 $71 $179 $1 $136 $1,8982023 $1,898 $71 $189 $1 $138 $1,916etc.
(b) from table 1 column (g)(c ) Projected as required under paragraph 39
Table 2 Projection of the Pension Plan's Fiduciary Net Position
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Projected Beginning
Fiduciary Net Position
Projected benefit
payments
Funded portion of benefit payments
"unfunded" portion of benefit
payments
Present value of funded benefit
payments at 7.5%
Present value of unfunded benefit
payments at 4%
Present value of Benefit Payments Using the Single discount Rate of
5.29%Year (a) (b) (c) (d) (e) (f) (g)2014 $1,432 $110 $110 $102 $0 $1042015 $1,500 $117 $117 $101 $0 $1062016 $1,565 $124 $124 $100 $0 $1062017 $1,628 $132 $132 $99 $0 $1072018 $1,687 $140 $140 $98 $0 $1082019 $1,742 $149 $149 $97 $0 $1092020 $1,791 $158 $158 $95 $0 $1102021 $1,835 $168 $168 $94 $0 $1112022 $1,871 $179 $179 $93 $0 $1132023 $1,898 $189 $189 $92 $0 $113etc. etc. etc. etc. etc. etc. etc. etc.2039 $548 $323 $323 $49 $0 $852040 $317 $326 $326 $0 $113 $812041 $65 $329 $329 $0 $110 $782042 $331 $331 $0 $106 $742043 $331 $331 $0 $102 $71etc. etc. etc. etc. etc. etc. etc. etc.2108 $1 $1 $0 $0 $02109Total $2,109 $1,725 $3,834
Table 3: Actuarial Present Values of Projected Benefit Payments
In this example, it is 5.29% You may wish to include these charts in your CAFR Which municipal bond rate will you use?
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MembershipParticipant Counts
Net Pension LiabilityTotal Pension Liability $1,800Plan Fiduciary Net Position $1,432Net Pension Liability $368Plan Fiduciary Net Position as a Percentage 80%
of Total Pension LiabilityNet Pension Liability as a Percentage 75%
of Covered Payroll
Development of the Single Discount RateSingle Discount Rate 5.29%Long‐Term expected rate of return 7.50%Long‐Term Municipal Bond Rate 4.00%Year when the Plan Fiduciary Net Position is projected to 2040
no longer be sufficient to make Projected Benefit Payments
Executive Summary
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Table 4[Client Name Retirement System]
Statement of Fiduciary Net PositionDecember 31, 2018
2018AssetsCash: 18,503$ Receivables:
Accounts receivable-sale of investments 427,029 Accrued interest and dividends 118,443 Accounts receivable-other 71,059
Total receivables 616,531
Investments:Fixed income 9,511,570 Domestic and international equities 17,295,289 Real estate 3,253,128 Private equity 2,201,225 Commodities 323,990
Total investments 32,585,202
Total Assets 33,220,236$
LiabilitiesPayables:
Accounts payable-purchase of investments 581,021 Accrued expenses 29,326 Accounts payable-other 29,294
Total Liabilities 639,641$
Net position restricted for pensions 32,580,595$
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Table 5[Client Name Retirement System]
Statement of Changes in Fiduciary Net Positionfor the Year Ended December 31, 2018
2018AdditionsContributions:
Employer 1,004,730$ Member 348,176
Total contributions 1,352,906
Investment income 2,642,221
Less investment expense (155,037) Net investment income 2,487,184
Other 1,803 Total additions 3,841,893$
DeductionsBenefit payments, including refunds of member contributions 1,818,376 Administrative expense 43,880 Other 197
Total deductions 1,862,453$
Net increase in net position 1,979,440$
Net position restricted for pensionsBeginning of year 30,601,155 End of year 32,580,595$
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Fiscal year ending June 30, 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009Annual money-w eighted rate of return, net of investment expenses 8.2% 11.2% 9.3% 13.5% 4.1% -4.3% -3.3% 12.6% 11.0% 12.9%
Schedule of Investment ReturnsLast 10 Fiscal Years
Schedules of Required Supplementary Information
TABLE 6
This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10 year trend is compiled, pension plans should present information for thse years for which information is available.
Monthly cash flows will be needed in order to conform with the example on page 65 of GASB 67
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Fiscal year ending June 30, 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Actuarially calculated employer contribution 1,004,730$ 1,026,928$ 966,168$ 732,455$ 486,051$ 437,935$ 394,545$ 380,114$ 489,387$ 539,593$
Contributions in relation to the actuarially determined contribution 1,004,730 1,026,928 966,168 732,455 486,051 437,935 394,545 380,114 489,387 539,593
Contributions deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Covered-employee payroll 5,615,736$ 5,205,802$ 4,982,084$ 4,949,878$ 4,933,615$ 4,744,340$ 4,398,443$ 4,107,964$ 3,858,090$ 3,562,416$ Actual contributions as a percentage of covered-employee payroll 17.9% 19.7% 19.4% 14.8% 9.9% 9.2% 9.0% 9.3% 12.7% 15.1%
Schedules of Required Supplementary InformationSchedule of Employer Contributions
TABLE 7
Last 10 Fiscal Years
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Fiscal year ending June 30, 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009Total pension liability 40,035,619$ 36,779,178$ 34,850,884$ 33,075,331$ 30,758,166$ 28,637,260$ 26,605,835$ 24,804,594$ 22,850,594$ 20,968,485$ Plan net position 32,580,595 30,601,155 Net pension liability 7,455,024$ 6,178,023$ 34,850,884$ 33,075,331$ 30,758,166$ 28,637,260$ 26,605,835$ 24,804,594$ 22,850,594$ 20,968,485$ Ratio of plan net position to total pension liability 81.38% 83.2%Covered-employee payroll 5,615,736$ 5,205,802$ 4,982,084$ 4,949,878$ 4,933,615$ 4,744,340$ 4,398,443$ 4,107,964$ 3,858,090$ 3,562,416$ Net pension liability as a percentage of covered-employee payroll 132.75% 118.7%
Schedule of the Employers' Net Pension LiabilityLast 10 Fiscal Years
Schedules of Required Supplementary InformationTABLE 8
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2018 2017 2016 2015 2014Total pension liabilityService cost 989,575$ Interest 2,779,924 Changes of benefit termsDifferences between expected and actual experience 789,864 Changes of assumptions 515,454 Benefit payments, including refunds of member contributions (1,818,375) Net change in total pension liability 3,256,442
Total pension liability-beginning 36,779,178 Total pension liability-ending (a) 40,035,620
Plan fiduciary net positionContributions-employer 1,004,730$ Contributions-member 348,176 Net investment income 2,487,184 Benefit payments, including refunds of member contributions (1,818,376) Administrative expense (43,880) Other 1,606 Net change in plan fiduciary net position 1,979,440
Plan fiduciary net position-beginning 30,601,155 Plan fiduciary net position-ending (b) 32,580,595$
[ client name]net pension liability (asset) (a) - (b) 7,455,025$
TABLE 9[Client Name Retirement System]
Statement of Changes in Fiduciary Net Positionfor the Year Ended December 31, 2018
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Notes Disclosures - Asset Allocation
Asset Class Target AllocationProjected Real Rate of Return
Fixed Income 28% 3.15%Domestic equity 48% 9.74%International equity 15% 10.82%Real estate 8% 7.91%Private equity 0% 14.23%Commodities 0% 5.61%Cash 1% 0.16%Total 100%
Table 10
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Sensitivity of the Net Pension Liability to the Discount Rate Assumption
1% Decrease
Current Blended
Rate Assumption 1% Increase
6.75% 7.75% 8.75%Net Pension Liability 8,237,802$ 7,455,024$ 6,545,511$
Table 11
For those of you with DROP plans, you will need to create a reconciliation of the DROP accounts
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Map these #67 exhibits against your current Plan CAFR;
Add those that are needed (especially the blended discount rate exhibits);
You may need to edit some already in existence
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Deferred Inflows and outflow need to be tracked each year
And keep the historical record
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•From the actuarial information you will receive a schedule of the Valuation Year Bases
•You will need to keep track of this data forever
Valuation Year 2015 Source of Information Initial Amount Amortization PeriodStraight Line Amortization Amount
Demographic gain/(loss) Actuary $37,539 15 years $2,503
Investment gain/(loss) Employer/Plan/Actuary 46,154 5 years 9,231
Change in assumptions Actuary 0
Change in employer’s proportion*
Actuary 0
Current period recognition Calculated $11,734
*Proportionate share based on the employer’s cash contribution for the fiscal year
Building the Financial Schedules‐Deferred Inflows/Outflows of Resources
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•Let's look at the second year
Item Initial Amount 2015 Amortization PeriodStraight Line
Amortization Amount 2015
Initial Amount 2016 Amortization PeriodStraight Line
Amortization Amount
Demographic gain/(loss) $37,539 15 years $2,503 $15,000 15 years $1,000
Investment gain/(loss) 46,154 5 years 9,231 $5,000 5 years $1,000
Change in assumptions $0
Change in employer’s proportion
$0
Current period recognition $11,734 $2,000
Building the Financial Schedules‐Deferred Inflows/Outflows of Resources
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•Now create the schedule for future recognition of pension expense
Valuation Year Ending Source for Information Demographic 2015 Investment 2015 Total
2016 Generated from prior schedule $2,503 $9,231 $11,734
2017 Generated from prior schedule 2,503 9,231 11,734
2018 Generated from prior schedule 2,503 9,231 $11,734
2019 Generated from prior schedule 2,503 9,231 11,734
2020 Generated from prior schedule 2,503 $2,503
Thereafter Generated from prior schedule 22,527 22,527
Total Generated from prior schedule $35,036 $36,923 $71,959
Building the Financial Schedules‐Deferred Inflows/Outflows of Resources
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•Let's look at the 2nd year
Valuation Year Ending Demographic 2015 Investment 2015 Total 2015 Demographic 2016 Investment 2016 Total 2016 Total all years
2017 $2,503 $9,231 $11,734 $1,000 $1,000 $2,000 $13,734
2018 2,503 9,231 11,734 $1,000 $1,000 $2,000 $13,734
2019 2,503 9,231 11,734 $1,000 $1,000 $2,000 $13,734
2020 2,503 0 2,503 $1,000 $1,000 $2,000 $4,503
2021 2,503 0 2,503 $1,000 $0 $1,000 $3,503
Thereafter 20,024 0 20,024 $9,000 0 $9,000 $29,024
Total $32,533 $27,693 60,226 $14,000 $4,000 $18,000 $78,226
Building the Financial Schedules‐Deferred Inflows/Outflows of Resources
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•Now you can create the DIO schedule
Deferred Inflows and Outflows of Resources
Source of Information Deferred Outflows of Resources Deferred Inflows of Resources
Differences between expected and actual experience in the measurement of the TPL
Prior Schedule “total” $35,036
Changes in assumptions Prior Schedule $0
Net difference between projected and actual earnings on pension plan investments
Prior Schedule “total” $36,923
Changes in employer’s proportion Actuary $0
Contribution to pension plan after measurement date
Auditor/Actuary $45,645
Total Calculated $45,645 $71,959
Building the Financial Schedules‐Deferred Inflows/Outflows of Resources
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•Let's look at the second year as well
Deferred Inflows and Outflows of Resources Source of InformationDeferred Outflows of Resources
Deferred Inflows of Resources Year 2
Notes
Differences between expected and actual experience in the measurement of the TPL Prior Schedule “total” $46,533
Year 2 = $35,036‐$2,503 + $14,000; or $46,533
Changes in assumptions Prior Schedule
Net difference between projected and actual earnings on pension plan investments Prior Schedule “total” $31,693
Year 2 = $36,923‐$9,231 +$4,000; or $31,693
Changes in employer’s proportion Actuary
Contribution to pension plan after measurement date Auditor/Actuary $55,000
Total Calculated $55,000 $78,226 Year 2 = $46,533 + $31,693 ; or
$78,226
Building the Financial Schedules‐Deferred Inflows/Outflows of Resources
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Pension Expense Source of InformationComponents for Pension Expense
Service cost Actuary $75,864
Interest on TPL Actuary 216,515
Expected Return Employer/Plan/Actuary ‐150,000
Experience change Actuary ‐2,503
Amortized investment gain/loss Actuary ‐9,231
Pension Expense Calculated $130,645
Building the Financial Schedules‐Development of the Pension Expense
Paul Niedermuller, CPA, Principal
Information from plan now WHAT? Impact of Measurement Date & Coordination with Auditors
Accounting and Audit Issues updated with additional guidance
Financial statements after implementation
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I have to do what with this and when……. How information can be reported to employers Year one implementation and beyond
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Standard#
Title Effective Date
GASB 67 Financial Reporting for Pension Plans
Fiscal Years beginning after June 15, 2013
GASB 68 Accounting and Financial Reporting for Pensions
Fiscal years beginning after June 15, 2014
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Impact of Measurement date and coordination with auditors
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June 2014
Plan Prior
Year-End
Plan Current
Year-End
December2014
June2015
December2015
Pension Expense(measurement period)
Deferred Outflows of Resources
Employer Current
Year-End
Employer Prior
Year-End
Measurement date will most likely correspond to year‐end of plan. Employer contributions made directly by the employer subsequent to the measurement date of the net pension liability and before the end of the employer’s fiscal year should
be recognized as a deferred outflow of resources.
Measurement Date
Public University participates in a cost‐sharing multiple‐employer defined‐benefit plan sponsored by the State of Example. Public University is implementing GASB Statement 68 during the year ended June 30, 2015. The cost‐sharing plan also has a fiscal year‐end of June 30th and implemented the provisions of GASB Statement 67 during the year ended June 30, 2014. Public University’s financial statements are a single‐year presentation.
In accordance with GASB Statement 68, the measurement date for Public University must be as of a date no earlier than the end of its prior fiscal year. Since Public University and the Plan have the same year end, Public University may elect to use June 30, 2014 or June 30, 2015 as the measurement date. However, once selected, the measurement date should be consistently applied from period to period.
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June 2013
Plan Year-End
June2014
Pension Expense(measurement period)
Deferred Outflows of Resources
Employer Current
Year-End
Employer Prior
Year-End
Measurement Date
Plan Year-End
June2015
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June 2013
Plan Year-End
Plan Year-End
June2014
Pension Expense(measurement period)
University Current
Year-End
University Prior
Year-End
Measurement Date
Plan Year-End
June2015
Potential for multiple measurement dates for entities within the same reporting entityInformation included in CAFR for pension plans reported as fiduciary fundsTimeliness of information available from pension plansImpact on precision of recorded amounts Significance of changes since measurement date
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Change in the NPL Expense Deferred Outflow or Inflow of Resources
Service cost X
Interest on TPL X
Plan Changes X
TPL‐related differences between expected and actual experience
Single‐Period Piece
X
TPL‐related changes in assumptions
Single‐Period Piece
X
Contributions subsequent to the measurement date
X
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EXAMPLE COST SHARING PENSION PLANSchedule of Pension Amounts
December 31, 2014Deferred Outflow of Resources Deferred Inflows of Resources Pension Expens
Changes in Changes in NetEmployer Employer Amortization
Proportion Proportion of Deferredand Differences and Differences Amounts from
Differences Differences Between Differences Differences Between Changes inBetween Between Contributions Between Between Contributions Proportionate Propotion and
Employer/ Expected Projected and Proportionate Expected Actual and and Proportionate Share of ProportionateNonmployer and Actual and Actual Share of and Actual Projected Share of Plan Share of
(special funding Net Pension Economic Investment Changes of Pension Economic Investment Changes of Pension Pension Pensionsituation) Liability Experience Earnings Assumptions Expense Experience Earnings Assumptions Expense Expense Expense
State of Example $ 38,589,135 428,768 2,058,088 1,500,690 782,365 380,371 1,063,285 – 584,365 1,878,717 12,375Employer 1 4,831,647 53,685 257,688 187,898 96,633 47,625 133,131 – 125,325 235,229 (1,793)Employer 2 5,798,553 64,428 309,256 225,499 115,971 57,156 159,773 – 245,386 282,303 (8,088)Employer 3 8,698,585 96,651 463,925 338,279 173,972 85,742 239,681 – 125,632 423,492 3,021Employer 4 11,396,244 126,625 607,800 443,188 227,925 112,332 314,012 – 386,325 554,828 (9,900)Employer 5 2,597,183 28,858 138,516 101,002 51,944 25,600 71,563 – 42,358 126,444 599Employer 6 1,716,569 19,073 91,550 66,756 34,331 16,920 47,298 – 24,325 83,571 625Employer 7 1,696,283 18,848 90,468 65,967 33,926 16,720 46,739 – 125,325 82,584 (5,712)Employer 8 14,316,562 159,073 763,550 556,756 286,486 141,118 394,478 – 152,005 697,004 8,405Employer 9 4,814,421 53,494 256,769 187,228 68,325 47,456 132,657 – 87,325 234,391 (1,188)Employer 10 4,808,301 53,426 256,443 186,990 67,528 47,395 132,488 – 41,035 234,093 1,656
Total $ 99,263,485 1,102,928 5,294,055 3,860,249 1,939,406 978,435 2,735,105 – 1,939,406 4,832,655 –
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•Net position prior period adjustment of $12,532,889
•DO/DI/pension expense from the plan information
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How are bond raters going to interpret the liability? Who will keep track of the amortization schedules for the employers? Allocation of pension liability between employer
Methodology and equity between opinion units
How to account for differences between the information provided in the Plan CAFR and the latest actuarial valuation. Which information will the employers select for their financial
statements?
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Luke HuelskampSenior Finance Manager
Municipal Employees’ Retirement System of Michigan
Agent plan with over 700 legally separate employers with different fiscal year end months, MERS has a 12/31 plan year end date
Within the 700 employers are over 2,000 different divisions each with their own unique multiplier, EE/ER contribution rates, FAC, vesting schedules etc. including closed divisions
Over 2,000+ different valuations are prepared Assets for the 2,000+ divisions have been separately maintained for the actuary
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Administered through Trust Employer contributions, non‐employer contributing entities and investment earnings are irrevocable (68‐Paragraph 4a)
Assets are protected from creditors of employer, and if a DB plan, from the creditors of the plan members (4c)
Assets are dedicated to providing pensions to members in accordance with the plan (4b)
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If the employer is well‐funded (95%), in general the liability will likely be small, however this is based on the context of each local government’s finances
If the employer is less well‐funded (60%), the new liability could be the largest number on their balance sheet, again, this is based on the context of each local government’s finances
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Assets 2015 2015 with GASBCash and Equivalents $ 1,320,000 $ 1,320,000 Receivables, net 10,114,000 10,114,000Capital Assets 27,442,000 27,442,000Total assets 38,876,000 38,876,000
LiabilitiesAccounts Payable/Accrued Liabilities 552,000 552,000Long Term Debt 19,630,000 19,630,000Net pension liability (also long term) 1,178,000Total liabilities 20,182,000 21,360,000
Net PositionNet investment in capital assets 10,003,000 10,003,000Unrestricted 8,691,000 7,513,000
Total Net Position $ 18,694,000 $ 17,516,000
Assets 2015 2015 with GASBCash and Equivalents $ 9,900,200 $ 9,900,200 Receivables, net 24,300,000 24,300,000Capital Assets, net 14,970,000 14,970,000Total assets 49,170,200 49,170,200
LiabilitiesAccounts Payable/Accrued Liabilities 5,590,000 5,590,000Unearned revenue 5,011,000 5,011,000Long Term Debt 26,380,000 26,380,000Net pension liability (also long term) 35,444,000Total liabilities 36,981,000 72,425,000
Net PositionNet investment in capital assets 5,690,000 5,690,000Unrestricted 6,499,200 ‐28,944,800
Total Net Position $ 12,189,200 $ (23,254,800)
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Employers, especially finance directors, will have to explain the net pension liability number to councils, boards, public and press. Where did this come from?
Unpaid balance of mortgage analogy vs. monthly payment
Issue with some finance directors, how will this affect my Budget?
Long term liability, not payable immediately Employer’s monthly payment continues Pension expense vs. annual required contribution, employers want to understand the difference
Explain GASB and how they are requiring the new Standards, confusion among smaller employers, some councils and boards on where this comes from
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Layout what needs to included in the valuation for GASB 68, notes, numbers, much of this will depend on your situation, if you are in a plan probably much of the information will come from the plan
Who will be responsible for what: actuary, plan, employer, combination of the parties, look at the different scenarios, first year of implementation, roll forwards, special situations, employer combinations and breakouts
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The actuary will roll forward total pension liabilities 12 months from the valuation date to the current year measurement date. Plan year is 12/31/14. Employer year end is 1/31/15. Valuations will not be finished until May 2015, hence the need for a roll forward from 12/31/13 valuation to 12/31/14 for the total pension liabilities to let the employer finish their financials.
Actuary will have service cost, interest on TPL Interest on the Total Pension Liability based on the beginning total
pension liability, plus service cost less actual benefit payments Investment returns in excess of expected can be calculated by the plan,
actuary and employer Admin expenses come from plan Significant changes between the previous valuation and the new
measurement date may require an updated valuation other than a simple roll forward
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Will likely need a supplemental valuation(s) in advance particularly if sharing of contributions between employers, or if new division or employer is created with a different plan design, multiplier, actives/retirees. Actuary should be able to give you updated numbers
Pay attention to the proposed plan structure when assets and liabilities are being reallocated, effective dates are important
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Extensive, much will come from the plan document, and your valuation, the actuary will likely have a GASB 68 section in the valuation
Plans will likely have a website specifically for much of the notes: Plan description, policies, benefits, contributions, assumptions, investments, etc. that are the same for all employers
Additional investment policies and returns to be disclosed, asset allocation, sensitivity of the NPL to changes in the discount rate +/‐ 1%, much of this information relates to how the long‐term expected rate of return is calculated
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Plan Description‐likely from valuation or plan Benefit Terms Description‐likely from the valuation Number of Employees Covered‐likely from the valuation
Contribution Requirement Authority‐likely from the plan or statutory requirements
Financial Statement Availability‐likely from the plan
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Information about the Net Pension Liability: Assumptions and other inputs‐likely from the valuation or plan
Experience Study‐date of last study on which the assumptions used in calculating the Total Pension Liability are based on
Discount Rate information
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Changes in the Net Pension Liability Schedule Beginning Balances, Total Pension Liability Fiduciary Net Position and the Net Pension Liability‐Employer’s responsibility but MERS will have an Excel template and an example
Service Cost‐Actuaries in GASB 68 section of valuation Interest on the Total Pension Liability‐Actuaries in GASB 68 section of valuation
Changes in Benefit Terms‐Actuaries in GASB 68 section of valuation
Experience Differences‐Actuaries in GASB 68 section of valuation
Assumption Changes‐Actuaries in GASB 68 section of valuation
Contributions from Employer‐Finance in Fiduciary Net Position statement
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Changes in the Net Pension Liability Schedule continued
Contributions from Nonemployer Contributing Entities‐plan would be have to present separately contributions if the plan knows of any contributions and this would also be reported on the employer level statements
Contributions from employees‐Fiduciary Net Position statement
Net investment income‐Fiduciary Net Position statement Benefit payments including refunds‐Fiduciary Net Position statement
Administration Expense‐Fiduciary Net Position statement
Other changes if significant‐
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Ending Balances, Total Pension Liability Fiduciary Net Position and the Net Pension Liability‐Employer’s responsibility but MERS will have an Excel template and an example; this will be an Excel calculation from above information
Measurement Date of the NPL‐actuary’s valuation Special Funding Situation‐ employer’s responsibility if any, plan may not be aware of
Changes in assumptions since the prior measurement date‐actuary valuation and likely plan
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Changes in benefit terms since the prior measurement date‐actuary valuation and likely plan
Discussion on allocated insurance contracts‐may be applicable to your pension plan
Discussion on nature of changes between the measurement date and the employer’s fiscal year end date that have a significant impact and quantification if known
Pension expense recognized by employer‐Employer’s responsibility
Deferred Inflows and Outflows Balances‐ Employer’s responsibility but your plan may have templates to assist
Employer’s contribution subsequent to the measurement date‐Employer’s responsibility but your plan may have instructions to help assist
63GFOA May 23, 2014
Schedules Deferred inflows and outflows‐ 5 year subsequent schedule by source that will be recognized in the employer’s pension expense‐ Employer’s responsibility but your plan may assist with templates and instructions
Sensitivity of the Net Pension Liability An example would be using the discount rate of 8%, what will the net pension liabilities be at 7% and 9%‐likely from the valuation, the actual requirement is 1%+/‐ from the discount rate that your pension plan uses
Start early, if your fiscal year is different from the measurement date you can get a head start, much will become routine, but the first year will likely take some time
64GFOA May 23, 2014
Components and sources of changes in the NPL, note that this is based on the measurement date; start with the total pension liability and fiduciary net position
Take ending NPL as a percentage of the total pension liability and as a percentage of covered‐employee payroll
Schedule of the actuarial determined contributions compared to the actual contributions made, with a ratio of covered‐employee payroll, note that is based on your fiscal year,
Notes should disclose significant factors affecting trends such as changes in benefit terms, different assumptions, increased employee contributions, population changes etc.
10 years of information, prospectively, if past periods are not available, will likely have information on the actuarially determined contributions and payments made
65GFOA May 23, 2014
Auditor’s opinion will likely be needed on the Schedule of Changes in Fiduciary Position by employer that allocates out employer/employee contributions, net investment income, admin expenses, pension disbursements and refunds.
A SSAE‐16 or SOC‐1 Type 2 Audit report or gap review is being considered by AICPA for agent plans on the processes for payroll reporting, contributions, the allocations net investment income, pension calculations, pension disbursements, etc. to individual employer accounts.
66GFOA May 23, 2014
Example Combining Schedule of Changes in Fiduciary Net Position (by employer)
Example Agent Multiple-Employer PERS Combining Schedule of Changes in Fiduciary Net Position
December 31, 2013
Additions: Contributions:
Employer 1 Employer 2 Employer 3 Total
Employer 86,252,000 34,500,000 51,751,000 172,503,000 Member 32,662,000 13,065,000 19,597,000 65,324,000
Net Investment income: 80,965,000 20,347,000 37,112,000 138,424,000 Total additions 199,879,000 67,912,000 I 0814601 000 376,251,000
Deductions: Pension benefits. including refunds 384,635,000 184,352,000 228,356,000 797,343,000 Administrative expenses 4,716,000 1,886,000 2,829,000 9,431,000
Total deductions 389,351,000 186,238,000 231 I 1851000 806,774,000 Net increase (decrease) (189,472,000) (118,326,000) (122,725,000) (430,523,000)
Net position restricted for pension benefits: Beginning of year 5,843,645,000 I ,468,538,000 678,595,000 9,99o,778,000 End of year $ 5,654,173,000 I,350,212,000 2,555,870,000 9,560,255,000
From AICPA "The New GASB Pension Standards -An Auditor's Perspective Part II"
GFOA May 23, 201467
Census data in regards to payroll and member data, will the employer’s auditors want to see the information sent to the actuary, and compare it to the employer’s records?
Employer and employer’s auditor rely on the actuary as a management specialist for calculating the total pension liability, and the deferred inflows and outflows relating to actuarial experience and assumptions
68GFOA May 23, 2014
Many employers, particularly the smaller and medium sized plans (and their auditors) will not have the experience or expertise
The employers will be responsible for the financial statements and journal entries, but we will assist them with examples and instructions
Excel templates for Required Supplementary Information, Deferred Inflows/Outflows and the Layers of Deferred I/O that are added each year
Note Disclosure information
69GFOA May 23, 2014
Special Situations Special Funding Situations Defined Contribution Plans
70GFOA May 23, 2014
Employers with different plans can aggregate numbers even if there are different measurement dates, one plan with an agent, another in‐house; but will need separate notes for each plan (21)
Significant changes between the measurement date and the employer’s fiscal year end will be reflected in the net pension liability with the next year’s measurement date
Collective bargaining agreements that are in effect beforethe measurement date, even though the benefits may not begin to accrue or be paid till after the measurement date, will require being measured in the total pension liability
Section 457(b) plans are not covered under Statement 68 (Statement 32, paragraph 20)
71GFOA May 23, 2014
Plan Reserves for an agent (or employer) plan that are held back, typically by Board decision, will need to be allocated out to employers for GASB reporting, not too common
If Net pension liability is negative (more assets than liabilities) then an asset will be presented on the employer’s statement of net position
72GFOA May 23, 2014
The NPL is not required to be displayed separately on the financial statements, however for some governments it will be a significant balance, which may be displayed separately on the financial statements
COLAs that are adopted by a Board, if “substantively automatic” should be included in the projection of benefit payments (9)
73GFOA May 23, 2014
3 criteria must be met: Individual account for each member Plan terms define the amount of contributions that an employer is required to make to an active member’s account for the period the plan member renders service
Pension received will depend on the contributions, investment earnings on the assets contributed, effects of forfeitures and administrative costs (so if a plan credits interest at a fixed rate it is a DB plan) (10)
74GFOA May 23, 2014
Pension expense by employer is attributable to the reporting period, net of forfeited amounts removed from employee accounts, (i.e. not vesting due to termination) (123 a)
Liability is for difference between amount owed and amounts paid by the employer (note that this is not NPL) (123‐b)
Notes disclosures, descriptions of plan, contribution rates, benefit terms, expenses, forfeitures and liabilities if any (126)
75GFOA May 23, 2014
If the DC assets convert to an annuity upon retirement this is a DB plan (10c);
If it is an option for the retiree to choose to purchase an annuity with a third party, this is a DC plan
76GFOA May 23, 2014
Jim Koss, Alan Sonnanstine, Cathy Nagy, actuaries Joe Heffernan, Michelle Watterworth, auditors Karl Greve, Charlene Powell and P2F2 implementation committee
Leon Hank, Betsy Waldofsky, Jen Wyble, MERS Dave Feenstra, software developer
77GFOA May 23, 2014