Governmental Accounting Standards Board (GASB) Exposure Draft on Pension Reporting
On July 8, 2011, the GASB issued an exposure draft, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27. The proposed standards would add new employer pension reporting requirements for pension liabilities and expenses, as well as additional note disclosures and required supplementary information provided in the annual financial statements.
The proposed standards would not change the way employers fund pension programs, only how pensions are reported in the financial statements. The proposed effective date is for fiscal years beginning after June 15, 2013 (fiscal year 2013–14).
Implications for local educational agencies (LEAs):
The GASB is proposing that employers participating in a cost-sharing multi-employer pension plan, such as those administered by CalPERS and CalSTRS in which LEAs participate, each report their proportionate share of the pension plan’s collective net pension liability. Each employer’s share would be based on its expected long-term contribution effort in relation to all expected employer contributions. Employers would also be required to incorporate in their reporting the effects of a non-employer’s (e.g., State of California) required contribution to the pension plan.
These reporting requirements would be a significant change from current practice where employers report expenditures and liabilities based on the employer’s contractually or statutorily required pension contributions. Fund accounting would not change, but there would probably be a new conversion entry to recognize the additional expense and the new liability in the government-wide statements.
The GASB is also proposing substantially increased note disclosures and required supplementary information provided in the financial statements, especially for employers participating in cost-sharing multi-employer plans (such as LEAs). These would include various new schedules such as the change over time in the total pension liability and the net position, both collectively and for the individual employer.
The Exposure Draft can be viewed or downloaded from the GASB Website. The deadline for comments is September 30, 2011 (Update: the deadline was extended to October 14, 2011).
The CDE has been in communications with CalSTRS staff regarding the proposed pension reporting standards. CalSTRS issued a letter dated July 18, 2011, to various groups, including LEA representatives, in an effort to alert interested parties to the proposed standards. The CDE will monitor the accounting implications of the proposed standards and issue guidance as necessary.