Don't fall behind: GASB's pension standards require immediate action.

• Author: Berman, Eric S.
• Position: Pensionplans

more than a year ago, and after years of due process and deliberation, the Governmental Accounting Standards Board released two landmark standards: GASB Statement No, 67, Financial Reporting for Pension Plans (an amendment of' GASB Statement No. 25); and GASB Statement No. 68, Accounting and Financial Reporting for Pensions (an amendment of GASB Statement No. 27).

Due to the changes in the standards, every governmental entity that offers a pension--defined benefit or defined contribution will be required to make changes over this year and next. Plans must implement for periods beginning alter June 15, 2013. For June 30 plans, implementation began July 1.

Employers have an extra year: they must implement for periods beginning after June 15, 2014. Even for closed, simple, single employer plans like many fire and police retirement plans in California--there's catching up to do ii planning and implementation hasn't started.

Major Changes

There are four major changes for defined benefit plans and employers that are members of defined benefit plans, including those that are members of CalPERs or GASTRs:

1. The net pension liability of the employer--calculated as the net of the value of assets held in trust to pay current and future benefits, less the actuarial present value of projected benefit payments incurred to date to be paid in the future upon each employee's retirement--will be on the face of each government's statement of net position. If a government is a component unit of another government that is a member of a defined benefit plan, md the component unit is a member of the same plan, but has no separate account, the primary government will have to perform a suballocation of its liability based on the contribution effort of the component unit its pensions. The liability is calculated based upon the plan. provisions as or the measurement date. CalPERs and CalSTRs will have no liabilities for pensions as the employer-employee exchange occurs at the employer level. The plan's role is merely to invest the contributions, calculate the liability and administer benefit payment.

2. The annual pension expense will not be based on the amount of actuarially determined contributions. This is a major change that will be difficult for decision-makers to hill' understand. The annual expense will he based upon the annual summation of work that includes an amount of deferred compensation to be paid upon retirement of the employee. There are a number of...