Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans amends GASB Statement No. 25. Statement No. 67 was issued June 2012 and will become effective for plan financial statements for fiscal years beginning after June 15, 2013 or for TRS in state fiscal year 2014.
TRS is actively studying and researching the new standards and preparing for GASB 67 with an implementation date of August 31, 2014 for the pension planís report.
GASB Statement No. 68, Accounting and Financial Reporting for Pensions amends GASB Statement No. 27. Statement No. 68 was issued June 2012 and will become effective for financial statements for fiscal years beginning after June 15, 2014.
Together these statements define how pension liabilities will be calculated and reported by employers and other non-employer contributing entities who prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP).
Note: Statement 68 applies only to pension benefits and does not apply to Other Post-Employment Benefits (OPEB) or TRS-Care related liabilities.
GASB Statement No. 71 Information
Pension Transition for Contributions Made Subsequent to the Measurement Date (an amendment of GASB Statement No. 68)
This Statement amends paragraph 137 of Statement 68. At the beginning of the period in which the provisions of Statement 68 are adopted, there may be circumstances in which it is not practical for a government to determine the amounts of all applicable deferred inflows of resources and deferred outflows of resources related to pensions. In such circumstances, the government should recognize a beginning deferred outflow of resources only for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability but before the start of the governmentís fiscal year. Additionally, in those circumstances, no beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions should be recognized. The provisions of this Statement should be applied simultaneously with the provisions of Statement 68.
Update as of August 1, 2014
Annual Financial Report of Reporting Entity — Statement 68 will require reporting entities to recognize their proportionate share of the net pension liability and operating statement activity related to changes in the collective pension liability. This means that reporting entities that contribute to the TRS pension plan should now report a liability on their financial statements for their proportionate share of the net pension liability.
TRS will be providing a Schedule of Employer Proportionate Shares each fiscal year to allocate the Net Pension Liability (NPL) to all employers and the non-employer contributing entity based upon their respective contributions to the pension fund. Member contributions are excluded from this calculation.
TRS will also provide a Schedule of Pension Amounts by Employer for fiscal year 2014 that will provide information the employer will need to prepare its financial statements. This schedule will report the plan pension expense, deferred inflows and deferred outflows for the pension plan by employer.
The State of Texas contributes the vast majority to the pension fund and accordingly has decided to audit these schedules and issue an opinion on them. This audit is tentatively scheduled to be completed by the State Auditorís Office in early Spring 2015 for fiscal year ended 08/31/14. Each reporting entity should consult with their auditor to determine to what extent they will be able to rely upon the State Auditorís Office audit work.
For the TRS pension fund, either the State of Texas or the employer pays the employer contribution to the pension fund as established by the General Appropriations Act. After working with state leadership and oversight agencies, the State Comptrollerís Office in particular, it was decided that the state will be reporting its proportionate share of the net pension liability as the non-employer contributing entity for the TRS pension fund as well as its proportionate share as the employer for senior colleges, universities and medical schools. (Please note that in the case of the state universities and medical schools, it is planned that their proportionate share of the net pension liability will be reported in the statewide CAFR in the government-wide financial statements and not in the fund financial statements.) The stateís total share of the net pension liability as the non-employer contributing entity plus their share as the employer for higher education is estimated at approximately 70 to 80 percent of the net pension liability.
The methodology for locating the net pension liability and the operating statement activity (pension expense, deferred inflows and deferred outflows) to each employer will be based on each employerís contributions as a percentage of all employer and non-employer contributing entity contributions. The employer contributions include the following types of contributions:
|Employer Contribution Types|
||Federal Funds/Private Grants
||Community and Junior College
||New Members PS - Pension Surcharge
||Non-OASDI Members (effective in FY15)
TRS will also be providing a Schedule of On-Behalf Contributions to be recognized as grant revenue for each fiscal year for the amounts paid by the State of Texas as the non-employer contributing entity. This accounting treatment will be similar to that used for the Medicare on-behalf payments for GASB 24 for public and charter schools.
For informational purposes only, TRS has estimated the proportionate share of the net pension liability for each reporting entity for the fiscal year ended August 31, 2013 based upon the employer contributions reported for that period. Click on the link below to obtain a listing of each reporting entityís estimated proportion of the net pension liability.
GASB FY 2013 Allocation
There will most likely be an increased level of audit scrutiny on employer contributions as a result of GASB 67 and 68. This is due in part to the fact that employer contributions are the basis for the allocation of the net pension liability. It is also due to the fact that the audit standards under which the allocation schedule is subject to be audited require enhanced procedures. Refer to the AICPA audit references below for more details.
TRS is implementing GASB 67 with a measurement date of August 31, 2014 and will provide sample language to assist the reporting entities in preparing the note disclosures required under GASB Statement 68 beginning with fiscal year 2015. Reporting entities with a June 30th fiscal year-end will most likely need to use a measurement date of August 31, 2014. Reporting entities with an August 31st fiscal year-end will also most likely need to use a measurement date of August 31, 2014, since the fiscal year end 2015 audited data may not be available in time for use in August 31, 2015 reporting. Selection of an entityís measurement date will affect what is reported for deferred inflows and outflows. If there are questions regarding this decision, please consult with your auditor to discuss this and other questions that arise.
Further updates will be posted as decisions and guidance become available.
The following are links to resources located on the GASB website.
GASB "Plain Language" statement on new pension reporting standards
GASB 68 Full Text and Summary Statement
Guide to Implementation of GASB Statement 68 on Accounting and Financial Reporting for Pensions
GASB 71 Full Text
AICPA Whitepaper on Governmental Employer Participation in Cost-Sharing Multiple-Employer Plans
New GASB Accounting Changes
Questions and Answers
GASB issued Statements No. 67 & 68 in June, 2012 that changed current pension accounting and financial reporting standards for state and local governments.
The new standards will change how pension plan liabilities are accounted for and disclosed in financial statements of public pensions and participating employers. The new standards do not affect or alter how public employee pensions are funded or how employer contribution rates are calculated.
Why did it Change?
To separate pension plan accounting from decisions on how to fund them, and to provide additional transparency regarding the reporting of pension liabilities and expenses and the impact of these obligations on the financial statements.
Who does it affect?
Pension plans along with the participating employers who contribute to these plans.
When is it effective?
The new standards are effective for fiscal years beginning after June 15, 2013 for public pension plans and for fiscal years beginning after June 15, 2014 for participating employers.
What is the impact?
The new standards state that employers participating in a cost-sharing, multiple-employer plan in many cases will need to report a net pension liability and expense equal to their proportionate share of the collective net pension liability and expense in their financial statements. TRS and other state agency staff are researching the applicability of this provision to TRS reporting entities.