January 6, 2016

GASB Exposure Draft on Pension Plans Would Amend Certain Requirements of Statements 67, 68, and 73

The Governmental Accounting Standards Board (GASB) recently issued an Exposure Draft of a proposed Statement that would address certain pension issues that have been raised with respect to GASB Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The proposed Statement, which would amend those statements and would be effective for reporting periods beginning June 15, 2016, would address issues regarding:

  • The presentation of payroll-related measures in required supplementary information. The definition of covered payroll would be changed from total payroll of employees covered by the pension plan to the portion of compensation paid to active employees on which compensation is based. Total payroll often includes pay elements that are not included in pay for purposes of determining pension benefits or contributions. This proposed change would address the practical barrier to pension plans that typically only receive payroll on which pension benefits and contributions are based. 
  • The selection of assumptions and the treatment of deviations from the guidance in Actuarial Standards of Practice for financial reporting purposes. The proposed Statement would clarify that a deviation, as the term is used in Actuarial Standards of Practice, is not considered to be in conformity with Statements 67, 68 and 73. 
  • The classification of payments made by employers to satisfy plan member contribution requirements. The proposed Statement would clarify that the payment by the employer of contributions that are classified by the pension plan terms as plan member contributions will be treated as plan member contributions, including for purposes of determining a cost-sharing employer’s proportion. The employer should disclose information about an arrangement under which it pays member contributions.

The deadline for submitting written comments on the Exposure Draft is February 12, 2016.

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Kim Nicholl

Kim Nicholl

SVP, National Public Sector Retirement Practice Leader