December 15, 2015

New Guidance from GASB Clarifies Requirements for Pensions Provided Through Certain Multiple-Employer Pension Plans

On December 11, 2015, the Governmental Accounting Standards Board (GASB) issued Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. This new guidance addresses a practical issue under Statement No. 68, Accounting and Financial Reporting for Pensions, associated with pensions provided by certain multiple-employer pension plans and to state and local governmental employers whose employees are provided with pensions from these plans. The statement amends the scope and applicability of Statement 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer pension plan that:

  • Is not a state or local governmental pension plan,
  • Is used to provide pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers, and
  • Has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan).

The requirements of Statement 78 are different from the requirements in Statement 68 and apply to the financial statements of state and local government employers whose employees are provided pensions that have the characteristics described above. GASB issued Statement No. 78 because jurisdictions participating in multiple-employer DB plans (for example, Taft-Hartley plans) found it difficult to obtain themeasurements and other information needed to comply with Statement No. 68 due to the nature of a governmental employer’s involvement in and relationship with the pension plan.

Statement 78 establishes:

  • The criteria for identifying the applicable pension plans;
  • Recognition of pension expense equal to the employer’s required contributions to the pension plan for the reporting period, and a payable amount should be reported for unpaid required contributions at the end of the reporting period;
  • Note disclosures of descriptive information about the plan, benefit terms, and contribution terms; and
  • Required supplementary information presenting a schedule of the employer’s required contribution amounts for the past 10 fiscal years (if practicable) as well as information about factors that significantly affect trends in the amounts reported.

Statement 78 is effective for reporting periods beginning after December 15, 2015.

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Kim Nicholl

Kim Nicholl

SVP, National Public Sector Retirement Practice Leader