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Your Tilted Balance Sheet–

GASB 68Overview

Presented by:

Kevin S. Wong, CPAGilbert Associates, Inc.

kswong@gilbertcpa.com

September 12, 2013

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Background and Overview

Background• Project initiated in January 2006• Exposure draft issued June 2011• Final standard issued June 2012

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Background and Overview (Continued)

Overview• Amends current GASB requirements that focus

more on required contributions

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Background and Overview (Continued)

• Implementation date Fiscal years beginning after June 15, 2014 (years ending

June 30, 2015, December 31, 2015)

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Big Picture – why?

1. Better transparency, consistency, and comparability with regard to pension costs• No more “kicking the can down the road”• Changes focus from a “funding” approach to

“earnings” approach• Liability for benefits “earned” vs. contributions

“paid”

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Big Picture – why? (Continued)

2. Recognition of the entire net pension liability3. A more comprehensive measure of pension

expense4. Pension Actuaries full employment act

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Required Calculationsa. Net Pension Liabilityb. Pension expensec. Pension-related deferred outflows/inflows

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What kind of plan do you have?

Single employer• Benefits the employees of only one employer

Agent multiple employer• Assets are pooled for investment purposes but

legally segregated

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What kind of plan do you have? (Continued)

Cost-sharing, multiple employer• Participating employers pool their pension

obligations • Plan assets can be used to pay any participating

employer’s pension• Most JPA staff participate in CalPERS’ 2.0% or 2.7%

at 55 Miscellaneous pool

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What kind of plan do you have? (Continued)

Impact to the financial statements is based on the plan type:

i. Single-employer and Agent-employer Plans• 100% recognition

ii. Cost-sharing multiple employer Plans• Recognize their proportionate share

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Required Calculations–Net Pension Liability

• (Total Pension Liability) – (Pension Plan’s Net Position) = Net Pension Liability

• Determined as of no earlier than sponsoring entity’s prior fiscal year end (“measurement date”)

• Approach based on a “benefits-earned” rather than a “funding-due” perspective

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Determining Total Pension Liability (TPL-PNP=NPL)

Definition• The portion of the actuarial present value of

projected benefit payments that is attributed to past periods of employee service (what has been “earned”)

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Determining Plan Net Position (TPL-PNP=NPL)

• Measured at the measurement date • Same valuation methods used by the Plan

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Determining Net Pension Liability (TPL-PNP=NPL)

Total Pension Liability – Plan Net Position

= Net Pension Liability

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Pension Expense

• Changes in Net Pension Liability• Incremental recognition of:

Differences between expected and actual• Economic or demographic factors• Investment earnings

Changes in assumptions

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Pension-related deferred outflows/inflows

• Unrecognized items not yet charged to pension expense

• Contributions from the employer after measurement date but before reporting period

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Note Disclosures

1. Description of the pension plan

2. Assumptions used to measure total pension liability• Detailed disclosures about the discount rate

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Note Disclosures (Continued)

3. The pension Plan’s fiduciary net position• Can refer to Plan’s report• Plan’s basis of accounting

4. Brief description of changes in benefit terms and assumptions since prior measurement date

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Note Disclosures (Continued)

5. Measurement date and date of the actuarial valuation

6. Employer’s policy for determining actual contributions to the plan

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Note Disclosures (Continued)

7. If not separately disclosed in the financial statements, disclose aggregate:a. Net pension liabilitiesb. Deferred pension outflows/inflows c. Pension expense for the period

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Note Disclosures (Continued)

• Components of deferred pension inflows and outflows, • Schedule of anticipated recognition of pension expense

of deferred outflows/inflows for the next five years.

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Note Disclosures (Continued)

Additional disclosures for each Single-Employer or Agent Multiple-Employer Plan

• Detail of changes in a schedule of changes in net pension liability

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Note Disclosures (Continued)

Additional disclosures for Cost-Sharing Multiple-Employer Plans

• The employer’s proportion (amount and percentage) of the collective net pension liability

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Note Disclosures (Continued)

Additional disclosures for Cost-Sharing Multiple-Employer Plans (Continued)

• The amounts of the net pension liability, deferred pension outflows and inflows, and pension expense recognized in the financial statements for each cost-sharing plan

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Required Supplementary Information

a. Ten-year schedule of changes in net pension liability (single-employer or agent multiple-employer plan only)

b. Ten-year schedule of components of net pension liability and covered payroll

c. Ten-year schedule of related contributions

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Required Supplementary Information (Continued)

d. Notes to required schedulesi. Information about factors that significantly affect

the identification of trends in the amounts reportedii. Significant methods and assumptions used in

determining actuarially calculated employer contributions

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Effective date and transition

• Effective for financial statement periods beginning after June 15, 2014

• Earlier application is encouraged

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What Should I Do Now???

• Know the overview of changes• GASB Pension Podcast Series (Dec 2012)

• Familiarize yourself with your plan• Enlist the help of CalPERS• July 26, 2013 memo re: assistance

• Begin educating stakeholders