The Government Accounting Standards Board (GASB) has two statements that outline the accounting rules for local governments that provide pension benefits. According to GASB, the standards are designed to improve financial reporting performed by state and local government plans, improve transparency and improve standards among accounting for pension plans.
Implementation of GASB 67/68 requires WRS to report in detail the current annual funding valuations for each pension plan. In addition, WRS will provide a schedule breaking out employers’ share of the actuarial information that they need to comply with GASB 68.
GASB 68 Reporting Requirements
Most WRS employers have a June 30 fiscal year end and will subsequently begin preparing annual financial statements. Entities preparing accrual based financial statements subject to standards issued by the Governmental Accounting Standards Board (GASB) have new requirements involving pension reporting, per GASB statement 68.
GASB 68 requires that WRS employers recognize a liability on their financial statements related to the unfunded pension liability of the pension system of which they are a member. Previously, entities reported their participation in WRS in a note to their financial statements. Under GASB 68, the entity will report their proportionate share of the Net Pension Liability (NPL) for each WRS plan they participate in on the face of their financial statements as a liability.
Although the accounting rules require including this as a liability, it is nothing that your entity needs to pay. It will decrease over time with normal contribution rates
Net Pension Liability (NPL)
WRS’s actuarial firm projects the cost of future benefits and the resulting payouts over the assumed lifespan of the participants. That future stream of payments is then discounted back to present value using a discount rate (generally the assumed rate of return on the pension plan investments). The present value of the liability is compared to the market value of pension assets at the measurement moment. These measurements are calculated with methods and assumption rules per new accounting rules for pension systems contained in GASB statement 67.
|Total Pension Liability
(PV of Projected Payments)
|- Pension Net Position
(PV of plan assets)
|= Net Pension Liability
|Pension Net Position as
% of Total Pension Liability
GASB allows several “rational and systematic” methods for calculating your entity's "proportional share". WRS allocates shares according to proportion of contributions last year. If your entity contributed .5% of all the contributions from all the employers in the plan last year, your entity’s share is .5% of the NPL.
Since the Fire A plan is closed with no new contributions, the NPL for Fire A will be allocated proportional to benefits paid last year. If the retirees from your entity in Fire A received 5% of the benefits paid last year, your entity’s share is 5% of the NPL for Fire A.