The Government Accounting Standards Board is soliciting comments for proposed changes to rules No. 67 and No. 68, which placed new requirements on how trustees of public pension plans disclose liabilities.
The proposed changes would improve financial reporting by “enhancing consistency” in how pensions are required to report annual financial statements.
Three improvements to the standards created in the rules are the result of stakeholders’ concerns that have been raised as rules 67 and 68 have been implemented.
Specifically, GASB wants to require pensions to record so-called “covered payroll” in accounting statements, which is the portion of compensation paid to active employees on which contributions to a pension plan are based.
Also, assumptions used in determining a pension plan’s total liability that deviate from established Actuarial Standards of Practice will not be considered to be compliant with GASB reporting requirements.
And payments made by employers to satisfy contribution requirements that are identified as employees’ required contributions will be classified as employee contributions, and included in the reporting on workers’ salaries and wages.
In 2012, GASB approved rules 67 and 68, which became effective for plans beginning in June 2013 and June 2014, respectively.
Together, the new reporting standards required pensions to report a “depletion date,” or the time when plan assets are expected to be insufficient to cover pension obligations. GASB 68 requires pensions to report Net Pension Liabilities, or unfunded liabilities.
A consensus of pension experts said the new accounting standards would increase liabilities for many pensions. The Center for Retirement Research estimates that total funding shortfalls for the nation’s public pension funds topped $1.1 trillion in 2013.
Others have estimated the aggregate pension funding shortfall to be closer to $4 trillion.
The new changes to GASB 67 and 68 are intended to be implemented by June of 2016, the group said.
GASB will be accepting written comments on the proposed changes until February 12, 2016. Here is a copy of the published exposure draft.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
