Cities Must Meet New Pension Financial Reporting Standards by June 15
Despite numerous requests from government finance organizations and individuals for an indefinite delay in the implementation of the accounting and financial reporting standards for public pensions, the Governmental Accounting Standards Board (GASB) announced last week that they would not delay implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions.
The requirements of Statement 68 will become effective in fiscal years beginning after June 15, 2014, and will require cities to report the “net unfunded accrued liability of their pensions” or the funds that have not yet been added to the pension plan but are expected to be needed to meet all retirement obligations.
Earlier this month, however, GASB issued a free toolkit that is designed to explain the new rules and provide cities with information that will ensure they are able to comply with Statement 68. The toolkit helps preparers, auditors, and users of state and local government financial reports understand and apply the revised pension accounting and financial reporting standards that GASB approved in June 2012.
Statement 68 specifically applies to pension plans that administer benefits through trusts that meet the following criteria:
- Contributions from employers (and by other governments and entities on behalf of the employers) are irrevocable;
- Assets in the trust are dedicated to providing pension benefits to the plan members; and
- Assets in the trust are protected from the creditors of the employers, the plan administrator, and the plan members (for defined benefit pensions).
The vast majority of government pensions are administered through trusts meeting these criteria. Statement 68 applies primarily to defined benefit pension plans, which are used to provide specified pensions that specify the benefits to be provided to the employees after the end of their employment.
This new toolkit complements the toolkit the GASB released in November 2013 for pension plans looking to implement GASB Statement No. 67, Financial Reporting for Pension Plans.