GASB moves to address four pension issues.

• Author: Gauthier, Stephen J.
• Position: The Accounting Angle - Governmental Accounting Standards Board

The GASB has taken steps to amend its recent pension guidance, addressing four practice issues identified by employers and pension plans.

The Governmental Accounting Standards Board (GASB) has taken steps to amend its recent pension guidance to address four important practice issues that have been identified by employers and pension plans involved in the implementation of the GASB's new pension standards:

* How to apply GASB Statement No. 68, Accounting and Financial Reporting for Pensions, to employers that participate in cost-sharing plans where neither the plan itself nor most of the participating employers are governmental entities.

* What measure of payroll should be presented in required supplementary information (RSI).

* Whether it is necessary to comply with actuarial standards when selecting the assumptions used to estimate the total pension liability.

* How to report member contributions that are picked up by the employer.

The GASB recently provided definitive authoritative guidance on the first of these four issues in GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans (December 2015). The board also has proposed new guidance to resolve the remaining three issues in its recent exposure draft (ED) devoted to Pension Issues (December 2015).

Nongovernmental Cost-Sharing Plans. Some governmental employers participate in Taft-Hartley and similar cost-sharing plans, where neither the plan itself, nor most participating employers, are governmental entities. In such cases, it may be difficult for a governmental employer to obtain the information needed to comply with GASB Statement No. 68. Accordingly, GASB Statement No. 78 directs participating employers in that situation to simply recognize pension expense/ expenditure in an amount equal to employer contributions associated with the period, even if paid in a subsequent period. Thus, the employers would recognize no pension liability other than for unpaid contributions. Employers will also need to present their required contributions for each of the ten most recent fiscal years as RSI. This new guidance will take effect no later than the end of the fiscal year ending December 31, 2016, with earlier implementation encouraged.

Measure of Payroll. RSI includes both the amount of payroll and the net pension liability expressed as a percentage of that amount. The GASB's recent pension standards direct that covered-employee payroll be used...