public employees retirement association of minnesota the nuts and bolts of gasb 68 implementation...
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Public Employees Retirement Association of Minnesota
The Nuts and Bolts of GASB 68 Implementation
Dave DeJonge
Assistant Executive Director, PERA
Public Employees Retirement Association of Minnesota
AgendaGASB 68—Key Concepts
GASB 71
Audit Issues
Fire Relief Associations
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Public Employees Retirement Association of Minnesota
GASB 68
Replaces GASB Statements 27 & 50
Effective for fiscal years beginning after June 15, 2014
Early implementation is discouraged!
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Public Employees Retirement Association of Minnesota
Why are the Standards Changing?
GASB 27 issued in 1994GASB 34—Government-Wide Financial Statements
using Accrual Accounting
Concepts Statement No. 4—Defined “Liability”
Survey of Financial Statement Users
Transparency, Accountability, Comparability
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Public Employees Retirement Association of Minnesota
Fundamental New Approach by GASB
Pension expenses tied to when the services are rendered, not when paid
Pension costs no longer tied to funding
Employers are primarily responsible forthe unfunded pension obligation
Employers need to book their proportional share of PERA’s unfunded liability as a liability on their government-wide financials
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Public Employees Retirement Association of Minnesota
Total Pension Liability (TPL)Calculated annually by PERA’s actuary, similar to
actuarial accrued liability
Defined in GASB 67 as the portion of the actuarial present value of projected benefit payments that is attributed to past periods of service but reflects
Anticipated benefit increases Projected salary growth Projected future service
No anticipation for future members
Likely uses a lower discount rate
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Public Employees Retirement Association of Minnesota
Pension Plan’s Fiduciary Net PositionPension plan’s net assets at fair value (GASB 63)
Calculated annually by PERA’s accounting staff
Determined using the same valuation methods used by the pension plan for purposes of preparing its statement of fiduciary net position
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Public Employees Retirement Association of Minnesota
Net Pension Liability (NPL)Equal to PERA’s Total Pension Liability (TPL)
minus PERA’s Fiduciary Net Position (similar to unfunded actuarial accrued liability)
Measured as of June 30 annually
Proportionate share of the NPL is reported on the employer’s Statement of Net Position
Similar to Unfunded OPEBObligation (GASB 45)
TPL - FNP = NPL
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Public Employees Retirement Association of Minnesota
Proportionate ShareThe NPL will be allocated to all of PERA’s employers
and included as a liability on the government-wide financial statements
Allocation methodology should be representative of future contribution effort of the employer
GASB allows allocation to be based on past contributions
GASB does not specify who calculates the proportionate share
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Public Employees Retirement Association of Minnesota
Proportionate ShareAICPA White Paper recommends having the
pension plan calculate proportionate share
PERA’s allocation method will be based on employer’s contributions paid to PERA in relationship to all employer contributions received.
EmployerContributions Paid to PERA
(A)
PERA’s Total ER Contrib.
(B)
Proportionate Share (%)
(A/B)
PERA’s Total NPL
(C)
Proportionate Share of NPL ($)
(A/B) x C
City A $830,387 $375,000,000 0.221% $4.5 Billion $9,945,000
City B $ 62,590 $375,000,000 0.017% $4.5 Billion $765,000
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Public Employees Retirement Association of Minnesota
Proportionate Share
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Public Employees Retirement Association of Minnesota
Proportionate ShareSome contributions will be excluded from the allocation because they do not reflect future contribution effort.
Regular Omitted Shortages/ Contrib. Total EE Paid by GrandEmployer Contrib. Deductions AMC Accruals GASB 68 Interest Delinquency ER (OD) Total0006-00 6,111,569.65 - 340.26 1,200.00 6,113,109.91 7.80 10.00 - 6,113,127.71 0010-00 932,024.26 - - 200.00 932,224.26 - - - 932,224.26 0012-00 672,103.56 - - 175.00 672,278.56 - - - 672,278.56 0014-00 186,583.81 - - 50.00 186,633.81 - - - 186,633.81 0022-00 2,113,627.07 460.88 - 500.00 2,114,587.95 10.21 - - 2,114,598.16 0030-00 1,009,888.97 2,877.93 275.00 1,013,041.90 47.32 32.90 - 1,013,122.12
Total 373,665,000.00 300,000.00 35,000.00 1,000,000.00 375,000,000.00 60,000.00 20,000.00 30,000.00 375,110,000.00
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Public Employees Retirement Association of Minnesota
Proportionate ShareSchedule of Employer Allocations
As of June 30, 2014
Unit ID Employer Name Contributions Allocation0002-00 AITKIN COUNTY 598,539.73 0.16045%0006-00 ANOKA COUNTY 6,113,109.91 1.63871%0008-01 BECKER COUNTY 814,665.35 0.21838%0010-00 BELTRAMI COUNTY 932,224.26 0.24990%0012-00 BENTON COUNTY REVENUE 672,278.56 0.18021%0014-00 BIG STONE COUNTY 186,633.81 0.05003%0016-00 BLUE EARTH COUNTY 1,333,635.98 0.35750%0018-00 BROWN COUNTY 683,226.74 0.18315%0020-00 CARLTON COUNTY 1,020,241.27 0.27349%0022-00 CARVER COUNTY 2,114,587.95 0.56685%0022-09 CARVER COUNTY HISTORICAL SOCIETY 9,978.97 0.00268%0024-00 CASS COUNTY 849,624.34 0.22776%0026-00 CHIPPEWA COUNTY 353,070.32 0.09465%0027-00 CHIPPEWA COUNTY SWCD 9,983.35 0.00268%0028-00 CHIPPEWA COUNTY HOSPITAL 980,099.65 0.26273%0030-00 CHISAGO COUNTY 1,013,041.90 0.27156%0032-00 CLAY COUNTY 1,075,596.37 0.28833%9115-00 CLAY COUNTY SWCD 17,500.39 0.00469%… … … …
375,000,000.00 100.00000%
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Public Employees Retirement Association of Minnesota
Proportionate ShareUnit ID Employer Name Contributions Allocation9113-00 CHISHOLM-HIBBING AIRPORT AUTHORITY 28,944.80 0.007759%9131-00 LOWER MINNESOTA RIVER WATERSHED DISTRICT 4,358.52 0.001168%9133-00 SCHOOLCRAFT LEARNING COMMUNITY 32,262.26 0.008648%9134-00 PIONEERLAND LIBRARY SYSTEM 124,406.47 0.033349%9139-00 COTTONWOOD-JACKSON HEALTH SERVICE 36,131.76 0.009686%9140-00 DOVER-EYOTA ST CHARLES SANITARY DISTRICT 10,322.14 0.002767%9152-00 EAST CENTRAL REGIONAL DEV. COMMISSION 30,945.33 0.008295%9153-00 RIVERWAY LEARNING COMMUNITY 23,008.59 0.006168%9155-00 SOUTHWEST TRANSIT 93,145.55 0.024969%9158-00 EAST CENTRAL REGIONAL LIBRARY 103,102.87 0.027638%9164-00 RIVER RIDER TRANSIT SERVICE 28,827.42 0.007728%9165-00 EXCELSIOR FIRE DISTRICT 1,293.26 0.000347%9168-00 EAST RANGE JOINT POWERS BOARD 4,001.61 0.001073%9176-01 NATIONAL JOINT POWERS ALLIANCE 250,757.97 0.067220%9180-00 HUMAN SERVICES OF FARIBAULT & MARTIN CO 332,469.18 0.089124%9194-00 GREAT RIVER REGIONAL LIBRARY 359,649.66 0.096410%9198-00 GREENWAY JOINT RECREATION ASSOCIATION 7,360.24 0.001973%9200-00 HEADWATERS REGIONAL DEVELOPMENT COMM 37,205.57 0.009974%9207-00 RED RIVER WATERSHED MANAGEMENT 5,628.13 0.001509%9208-00 GARRISON-KATHIO SANITARY DISTRICT 2,969.34 0.000796%9212-00 PENNINGTON-RED LAKE COUNTY NURSING SERVI 36,180.41 0.009699%9218-00 MINNESOTA VALLEY EDUCATIONAL DISTRICT 42,035.45 0.011268%
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Public Employees Retirement Association of Minnesota
Proprietary/Fiduciary FundsShould the NPL be allocated to other statements
prepared on an accrual basis?
No allocation requirements in GASB 68
NCGA Statement 1, paragraph 42--long-term liabilities should be reported in statement of net position (fiduciary net position) if:
Amount is material
Liability is directly related to the fund
Liability is expected to be paid from the fund
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Public Employees Retirement Association of Minnesota
MEASUREMENT DATEMEASUREMENT PERIOD
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Public Employees Retirement Association of Minnesota
Measurement DateDate at which PERA’s liabilities and assets are
valued to determine the Net Pension Liability (NPL)
June 30 annually
Employers choose appropriate Measurement Date for reporting purposes
Measurement date must be no earlier than the end of the employer’s prior fiscal year, consistently applied from period to period
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Public Employees Retirement Association of Minnesota
Measurement PeriodPeriod of time from one measurement date to the
next, during which pension costs are calculated
PERA’s fiscal year (July 1 – June 30)
June 30, 2014June 30, 2015
June 30, 2016June 30, 2017
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Public Employees Retirement Association of Minnesota
Scenario 1Reporting Date = December 31, 2015
Measurement Date = ??
December 31, 2014 June 30, 2015 December 31, 2015June 30, 2014
Measurement Date
Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Date
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Public Employees Retirement Association of Minnesota
Scenario 1Reporting Date = December 31, 2015
Measurement Date = June 30, 2015
December 31, 2014 June 30, 2015 December 31, 2015June 30, 2014
Measurement Date
Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Period
Measurement Date
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Public Employees Retirement Association of Minnesota
Scenario 2Reporting Date = June 30, 2015
Measurement Date = June 30, 2015
June 30, 2014 June 30, 2015June 30, 2013
Measurement Date
Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Date
Measurement Date
Measurement Period
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Public Employees Retirement Association of Minnesota
Annual TimelineJune 30—Fiscal year end (Measurement Date)
August—Census and asset data sent to actuary
November—Actuarial valuations finalized
December 1—PERA prepares GASB schedules
December—Auditor audits schedules
December 31—PERA publishes GASB Schedules
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Public Employees Retirement Association of Minnesota
Scenario 2Reporting Date = June 30, 2015
Measurement Date = June 30, 2014
June 30, 2014 June 30, 2015June 30, 2013
Measurement Date
Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Date
Measurement Date
Measurement Period
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Public Employees Retirement Association of Minnesota
PENSION EXPENSE & DEFERRED AMOUNTS
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Public Employees Retirement Association of Minnesota
Pension Expense GASB 27
Employer contributions made during employer’s fiscal year
Easy to calculate
Easy to audit
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Public Employees Retirement Association of Minnesota
Pension Expense GASB 68
Tied to when pension liability is incurred (services are rendered), not when it is funded
Change in NPL during measurement period +/- deferrals
Calculated by PERA’s actuary
Will likely be volatile from year to year
May be a negative expense (revenue)
Can’t be calculated by employers
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Public Employees Retirement Association of Minnesota
Pension Expense Expensed immediately:
Current period service cost (normal cost)
Interest on the beginning total pension liability
Impact of changes in benefit provisions/terms
Projected earnings on plan investments
Other changes in plan fiduciary net position other than employer contributions or benefit payments (e.g., employee contributions, admin costs)
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Public Employees Retirement Association of Minnesota
Deferred Inflows/Outflows1. Differences between expected and actual
experience with economic & demographic factors (actuarial gains and losses during the year):
MortalityPayroll IncreasesRetirementsEmployee Turnover
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Public Employees Retirement Association of Minnesota
Deferred Inflows/Outflows2. Effect of changes in assumptions about future
economic and demographic factors (usually as a result of an experience study):
Discount RateMortality TablesFuture Payroll IncreasesFuture Inflation RateRetirementsEmployee Turnover
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Public Employees Retirement Association of Minnesota
Deferred Inflows/Outflows3. Differences between actual and projected earnings
on plan investments.
4. Net effect of a change in the employer’s proportional share.
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Public Employees Retirement Association of Minnesota
Pension Expense Change in NPL during measurement period +/- deferrals
Source of Change in NPL Expense/Deferral
Service (Normal) Cost Immediate
Interest on the TPL Immediate
Projected Investment Earnings Immediate
Changes in Benefit Provisions Immediate
Actuarial Gains and Losses Expense over average remaining service lives of all actives and in-activesChanges in Actuarial Assumptions
Changes in Proportionate Share
Differences between Projected and Actual Investment Earnings
Expense over 5-year closed period
Other Changes in the NPL Immediate
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Public Employees Retirement Association of Minnesota
Pension Expense Meas. Date
Item Total Cost Amtz. Period Expense Deferred Inflow/Outflow
6/30/15 Service (Normal) Cost $50,000 NA $50,000 $0
6/30/15 Interest on the TPL $100,000 NA $100,000 $0
6/30/15 Projected Inv. Earnings ($110,000) NA ($110,000) $0
6/30/15 Employee Contributions ($25,000) NA ($25,000) $0
6/30/15 Ben. Provision Changes $20,000 NA $20,000 $0
6/30/15 Change in Actuarial Assumptions
$18,000 9 Years $2,000 D.O. $16,000
6/30/15 Actuarial Gains/Losses $9,000 9 Years $1,000 D.O. $8,000
6/30/15 Change in Proportionate Share
($900) 9 Years ($100) D.I. ($800)
6/30/15 Difference between projected and actual investment earnings
($40,000) 5 Years ($8,000) D.I. ($32,000)
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Public Employees Retirement Association of Minnesota
Schedule of Pension Amounts
COST SHARING PENSION PLANSchedule of Pension Amounts by Employer
As of and for the year ended 6/30/2015
Deferred Outflows of Resources Deferred Inflows of Resources
Employer
Net Pension Liability
(NPL)
Differences Between Expected
and Actual Experience
(9 year amtz.)
Difference Between
Projected and Actual
Investment Earnings on
Investments (5 year amtz.)
Changes in Actuarial
Assumptions (9 year amtz.)
Differences Between
Expected and Actual
Experience (9 year amtz.)
Changes in Actuarial
Assumptions (9 year amtz.)
Pension Expense
1234-00 $2,000,000 $8,000 $8,000 $720 $4,000 $0 $10,000 1245-00 $1,000,000 $4,000 $4,000 $360 $2,000 $0 $5,000 1350-00 $750,000 $3,000 $3,000 $270 $1,500 $0 $3,750
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Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differencesbetween Projected and Actual Earnings on Pension Plan Investments
Year
Difference between Projected and Actual Earnings on Investments
Amtz. Period (Years) 2015 2016 2017 2018 2019 2020 2021 2022
2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 201620172018
Net Increase (Decrease) in Pens Exp $ 20,541
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Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differencesbetween Projected and Actual Earnings on Pension Plan Investments
Year
Difference between Projected and Actual Earnings on Investments
Amtz. Period (Years) 2015 2016 2017 2018 2019 2020 2021 2022
2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 2016 $ (159,517) 5 $ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)20172018
Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362)
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Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differencesbetween Projected and Actual Earnings on Pension Plan Investments
Year
Difference between Projected and Actual Earnings on Investments
Amtz. Period (Years) 2015 2016 2017 2018 2019 2020 2021 2022
2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 2016 $ (159,517) 5 $ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)2017 $ (114,275) 5 $ (22,855) $ (22,855) $ (22,855) $ (22,855) $ (22,855)2018
Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) $ (34,217)
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Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differencesbetween Projected and Actual Earnings on Pension Plan Investments
Year
Difference between Projected and Actual Earnings on Investments
Amtz. Period (Years) 2015 2016 2017 2018 2019 2020 2021 2022
2015 $ 102,705 5 $ 20,541 $ 20,541 $ 20,541 $ 20,541 $ 20,541 2016 $ (159,517) 5 $ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)2017 $ (114,275) 5 $ (22,855) $ (22,855) $ (22,855) $ (22,855) $ (22,855)2018 $ 117,285 5 $ 23,457 $ 23,457 $ 23,457 $ 23,457 $ 23,457
Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) $ (34,217) $ (10,760)
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Public Employees Retirement Association of Minnesota
Deferred BalancesIncrease (Decrease) in Pension Expense Arising from the Recognition of Differences
between Projected and Actual Earnings on Pension Plan Investments
Balances at June 30, 2018
Investment Earnings Less Than Projected
Investment Earnings Greater Than Projected
Amounts Recognized in Pension Expense
through June 30, 2018
Deferred Outflows of Resources
Deferred Inflows of Resources
Year (a) (b) (c) (a) - (c) (b) - (c)
2015 $102,705 $82,164 $20,541
2016 $(159,517) $(95,709) $(63,808)
2017 $(114,275) $(45,710) $(68,565)
2018 $117,285 $23,457 $93,828
$114,369 $(132,373)
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Public Employees Retirement Association of Minnesota
Deferred BalancesFootnote Disclosure
As of June 30, 2018
Deferred Outflows
Deferred Inflows
of Resources of ResourcesDifference between projected and actual investment earnings 114,369 132,373
Changes of assumptions 1,714 130
Differences between expected & actual experience 24,675 13,598
Changes in proportionate share 82 31
Employer contributions subsequent to the measurement date 1,065 0141,905 146,132
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Public Employees Retirement Association of Minnesota
Scenario 1Employer contributions paid to PERA between the
Measurement Date and Reporting Date are Deferred Outflows of Resources, not expenses.
December 31, 2014 June 30, 2015 December 31, 2015June 30, 2014
Measurement Date
Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Period
Measurement Date
ER Contrib
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Public Employees Retirement Association of Minnesota
Future ExpensesFootnote Disclosure
Year ended June 30:20Y0 $ (21,372)20Y1 11,59320Y2 22,19820Y3 19,37620Y4 12,450
Thereafter 33,468
This schedule will indicate when the accumulated deferred amounts are scheduled to be expensed.
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Public Employees Retirement Association of Minnesota
OTHER NOTE DISCLOSURES AND RSI SCHEDULES
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Public Employees Retirement Association of Minnesota
Footnote DisclosuresGASB 68
Separate disclosures for each planExtensive note disclosures, including:
Description of benefits (terms, policies and authority) Contribution requirements (rates, basis and authority) Actuarial assumptions and discount rate used to measure
total pension liability Changes in actuarial assumptions Investment information (asset allocation, rates of return for
each asset class)
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Public Employees Retirement Association of Minnesota
Footnote DisclosuresGASB 68 footnote disclosures (contd.)
Employer’s share and percentage of the NPL Balances of deferred inflows and outflows NPL using discount rate of +/- one percentage point
Information required will be provided by PERA
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Public Employees Retirement Association of Minnesota
Footnote DisclosuresDisclosure Referenc
eSource Requirement
Total of employer’s pension liabilities, pension assets, deferred outflows/inflows related to pensions, and pension expense for the period (if not identifiable in financials)
74 PERA New
Name of plan, ID of system that administers the plan, ID as agent or cost-sharing plan
76.a PERA or Employer
Existing
Description of benefit terms, including types of employees covered, types of benefits, pension formulas, COLAs, and authority under which benefit terms are established/amended.
76.b PERA or Employer
Existing
Description of contribution requirements, including how contributions are determined, how contribution rates are changed, actual contribution rates, and amount of contributions recognized by the pension plan for that period.
76.c PERA or Employer
Existing (with slight changes)
How to obtain PERA’s CAFR 76.d PERA or Employer
Existing
Significant assumptions/inputs used to measure the total pension liability, including: inflation, salary changes, COLA’s, mortality, and dates of experience studies on which assumptions are based.
77 PERA New
Discount rate applied when measuring TPL and change in the discount rate since the prior measurement date, if any.
78.a PERA (Actuary) New
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Public Employees Retirement Association of Minnesota
Footnote DisclosuresAssumptions made about projected cash flows when calculating the discount rate
78.b PERA (Actuary) New
Long-term expected rate of return and how it was determined, including significant methods and assumptions used for that purpose.
78.c PERA (SBI) New
If the discount rate incorporates a municipal bond, the bond rate used and source of that rate.
78.d PERA (Actuary) New
Periods of projected benefit payments to which long-term ROR is used and municipal bond rate is used when determining the discount rate
78.e PERA (Actuary) New
Assumed asset allocation of portfolio, long-term expected real ROR for each asset class, and whether ROR is presented as arithmetic or geometric.
78.f PERA (SBI) New
Employer’s NPL calculated using discount rates that are 1% higher and lower than the actual discount rate used to calculate the TPL.
78.g PERA (Actuary) New
Pension plan’s fiduciary net position has been determined on the same basis used by the pension plan, and a brief description of pension plan’s basis of accounting, including policies regarding benefit payments and the valuation of plan investments.
79 PERA New
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Public Employees Retirement Association of Minnesota
Footnote DisclosuresEmployer’s share of the NPL 80.a PERA (Actuary) New
Employer’s percentage of NPL, the basis on which its proportion was determined, and change in its proportion since the prior measurement date
80.b PERA New
Measurement date of NPL and date of actuarial valuation on which the TPL is based.
80.c PERA New
Assumption changes or other inputs that affected measurement of the TPL since the prior measurement date
80.d PERA New
Changes of benefit terms that affected measurement of the TPL since the prior measurement date
80.e PERA New
Nature of changes between measurement date of collective NPL and employer’s reporting date if they are expected to have a significant effect on the employer’s share of the NPL.
80.f PERA or Employer
New
Amount of pension expense recognized by the employer in the reporting period.
80.g PERA or Employer
New
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Public Employees Retirement Association of Minnesota
Footnote DisclosuresEmployer’s balances of deferred outflows/inflows related to pensions, classified in 5 categories: Differences between expected and actual
experience Changes of assumptions/inputs Difference between expected and actual
earnings Changes in employer’s proportion and
differences between contributions made and employer’s proportionate share of contributions
Employer’s contributions to the pension plan subsequent to the measurement date
80.h PERA and Employer
New
Schedule showing net amount of balances of deferred outflows/inflows that will be recognized in the employer’s pension expense and recognized as a reduction in the collective net pension liability in the future.
80.i PERA and Employer
New
Amount of revenue recognized for the support provided by non-employer contributing entities, if any.
80.j Employer New
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Public Employees Retirement Association of Minnesota
Required Supplementary Information (RSI)
GASB 27—None required
GASB 68—2 new 10-year schedules required
Schedule of Proportionate Share of the NPL
Schedule of Employer Contributions
Separate schedule for each plan
Notes to RSI will include significant changes in actuarial assumptions, benefit provisions, etc. that affect the identification of trends in RSI schedules.
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Public Employees Retirement Association of Minnesota
Schedule of Proportionate Share of the NPL
6/30.
CITY’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITYPERA General Employees Retirement Fund
Last 10 Fiscal Years* (Dollar amounts in thousands)
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Public Employees Retirement Association of Minnesota
Schedule of Employer Contributions
PERA General Employees Retirement FundLast 10 Fiscal Years
(Dollar amounts in thousands)
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Public Employees Retirement Association of Minnesota
GASB 71
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Public Employees Retirement Association of Minnesota
GASB 71Amends transition provisions found in paragraph
137 of Statement 68
Allows all deferred inflows and outflows related to pensions to start at 0…except employer contributions
Employer contributions included in initial measurement period but already expensed (closed to net position) are to be reclassified
Adjusts deferred outflows and net position
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Public Employees Retirement Association of Minnesota
GASB 71Employer contributions already expensed during
initial measurement period are reclassified
December 31, 2014 June 30, 2015 December 31, 2015June 30, 2014
Measurement Date
Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Period
Measurement Date
ER Contrib
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Public Employees Retirement Association of Minnesota
Transition Year Journal EntriesEmployer contributions already expensed during
initial measurement period are reclassified
December 31, 2014 June 30, 2015 December 31, 2015June 30, 2014
Measurement Date
NPL: $2,650,000 Employer’s Fiscal Year End(Reporting Date)
Employer’s Prior Fiscal Year End
Measurement Period
Measurement Date
NPL: $2,500,000
$45,000
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Public Employees Retirement Association of Minnesota
Transition Year Journal Entries1) To record beginning net pension liability (6/30/14)
Net Position $2,500,000
Net Pension Liability$2,500,000
2) To record ER contributions expensed in previous year but fall within measurement period
Deferred Outflow $ 45,000Net Position $
45,000 56
Public Employees Retirement Association of Minnesota
AUDIT ISSUES
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Public Employees Retirement Association of Minnesota
Audit IssuesAICPA issued 3 whitepapers
Issues Related to Information for Employer Reporting—Cost Sharing Plans
Issues Associated with Testing Census Data Issues Related to Information for Employer Reporting—
Agent Multiple-Employer PlansIssued Interpretations to 3 AU-C sections
AU-C 500 AU-C 600 AU-C 805 Moving to audit guide next year
Links on www.aicpa.org (Search for “GASB Matters”)
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Public Employees Retirement Association of Minnesota
Audit Issues--ProblemAudited financial statements of the plan only include
disclosure of the collective net pension liability for the plan as a whole. They do NOT include:• Deferred outflows/inflows of resources by category• Pension expense• Each participating employer’s share of collective
pension amountsAudited financial statements of the plan may not
include necessary information to calculate allocation percentages
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Public Employees Retirement Association of Minnesota
Audit Issues--ProblemGAAP financial statements of the plan and additional
unaudited information from the plan will NOT provide sufficient appropriate audit evidence for the governmental employer auditor.Absent additional audit evidence from the cost-sharing
plan, the employer auditor would not likely be able to accumulate sufficient appropriate audit evidence.
If unable to accumulate sufficient appropriate evidence, the employer auditor should modify the audit opinion.
(AU-C section 9500, Question 2)
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Public Employees Retirement Association of Minnesota
Audit Issues--SolutionPlan prepares “schedule of employer allocations” for
which plan auditor is engaged to provide opinionUse allocation method based on covered payroll or
actual contributions if they are expected to be representative of future contributions
This schedule does not need to be included in the plan’s CAFR
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Public Employees Retirement Association of Minnesota
Audit Issues--Solution
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Public Employees Retirement Association of Minnesota
Audit Issues--SolutionPlan prepares “Schedule of Pension Amounts by
Employer” for which plan auditor engaged to provide opinionSchedule includes the following elements for each
employer:• Net pension liability• Deferred outflows of resources by category• Deferred inflows of resources by category• Pension expense
An alternative would be to prepare a “Schedule of Collective Pension Amounts” for the plan as a whole
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Public Employees Retirement Association of Minnesota
Audit Issues--Solution
COST SHARING PENSION PLANSchedule of Pension Amounts by Employer
As of and for the year ended 6/30/2015
Deferred Outflows of Resources Deferred Inflows of Resources
Employer
Net Pension Liability
(NPL)
Differences Between Expected
and Actual Experience
(9 year amtz.)
Difference Between
Projected and Actual
Investment Earnings on
Investments (5 year amtz.)
Changes in Actuarial
Assumptions (9 year amtz.)
Differences Between
Expected and Actual
Experience (9 year amtz.)
Changes in Actuarial
Assumptions (9 year amtz.)
Pension Expense
1234-00 $2,000,000 $8,000 $8,000 $720 $4,000 $0 $10,000 1245-00 $1,000,000 $4,000 $4,000 $360 $2,000 $0 $5,000 1350-00 $750,000 $3,000 $3,000 $270 $1,500 $0 $3,750
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Public Employees Retirement Association of Minnesota
Audit Issues—Census DataUnderlying census data from employers should be
tested by plan’s auditorRisk-based approach by plan auditor to select
employers to test (review payroll registers).Size of Employer:Largest employers (e.g. > 5% of plan) tested on a 5-
year cycle (Hennepin County)Smallest employers will never be tested (e.g. 1100
employers represent 2% in aggregate of plan)Everyone else tested on a 10-year cycle
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Public Employees Retirement Association of Minnesota
Audit Issues—Census DataOther risk factors to consider:
Past errors or control deficiencies of an employerNew employerWhether employer financial statements have received
unmodified opinionsLength of time since procedures last performed for an
employerNews stories
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Public Employees Retirement Association of Minnesota
Audit Issues—Census DataPlan auditor selects which employers should be
tested each year
Plan auditor may engage local government auditors in accordance with AT (Attest) Section 101 to provide opinion on accuracy of census data reported to plan
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Public Employees Retirement Association of Minnesota
Audit IssuesActuarial valuation reports will be posted on PERA’s
website
Two valuation reports for each planGASB 67/68 Compliant
Funding
Use to verify collective levelpension costs
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American Institute of CPAs® 69Governmental Audit Quality Center
Cost-Sharing Plans: Employer Responsibilities
• Complete and accurate census data to plan
• Appropriateness of information used to record financial statement amounts
• Whether plan auditor’s report on schedules are adequate and appropriate for employer purposes
• Amounts in schedules specific to employer• employer amount used in allocation percentage
(numerator)• recalculate allocation percentage of employer• recalculate allocation of pension amounts based on
allocation percentage of employer
Report
Evaluate
Verify & Recalculate
American Institute of CPAs® 70Governmental Audit Quality Center
Cost-Sharing Plans: Employer Auditor Responsibilities
• Sufficiency and appropriateness of audit evidence
• Whether plan auditor’s report on schedules are adequate and appropriate for auditor purposes (e.g., evidence)
• Review plan auditor’s report and any related modifications• Evaluate whether plan auditor has necessary competence
and independence• Determine whether named as specified user
• Amounts in schedules specific to employer• Employer amount used in allocation percentage
(numerator)• Recalculate allocation percentage of employer• Recalculate allocation of pension amounts based on
allocation percentage of employer
• Census data submitted to plan
Determine
Evaluate
Verify & Recalculate
Test
Public Employees Retirement Association of Minnesota
FIRE RELIEF ASSOCIATIONS
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Public Employees Retirement Association of Minnesota
Fire Relief AssociationsOffice of the State Auditor’s June 2014 Pension
Division NewsletterCities that prepare financial statements in accordance
with GAAP need to include the NPL and pension expense of the affiliated relief association If amounts are material If the fire department is a city fire department (not an
independent non-profit firefighting corporation)Alternative to costly actuarial valuation—accept liability
amounts calculated using State Auditor’s annual Schedule Form if difference is not significant
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Public Employees Retirement Association of Minnesota
Fire Relief AssociationsMost relief associations are overfunded, so NPL will
be a Net Pension Asset.
Work with relief associations and cities now!
Cities/Townships whose fire departments have joined PERA’s Statewide Volunteer Firefighter Retirement Plan will be provided with GASB 68 schedules
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Public Employees Retirement Association of Minnesota
Single/Agent PlansFewer footnote disclosures
One additional footnote schedule
Schedule of Changes in the Net Pension Liability
One additional RSI schedule
10-year Schedule of Changes in the NPL
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Public Employees Retirement Association of Minnesota
Changes in the NPL Note Disclosure
Increase (Decrease)
Total Pension Liability
Plan Fiduciary Net Position
Net Pension Liability
(a) (b) (a) - (b)Balances at 6/30/X8 $2,853,455 $2,052,589 $800,866 Changes for the year:
Service cost 75,864 75,864 Interest on the TPL 216,515 216,515 Differences between expected and actual experience (37,539) (37,539)Contributions--employer 79,713 (79,713)Contributions--employee 31,451 (31,451)Net investment income 196,154 (196,154)Benefit and refund payments (119,434) (119,434) - Administrative expenses (3,373) 3,373 Other changes 8 (8)
Net changes 135,406 184,519 (49,113)Balances at 6/30/X9 2,988,861 2,237,108 751,753
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Public Employees Retirement Association of Minnesota
More Information
PERA’s Websitewww.mnpera.orgEmployers tabGASB 68 Toolkit
Contact Dave DeJonge [email protected]
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