GASB Statements 67 and 68


Please note that a new version of the GASB 68 report and Excel tables is now available. These enhanced reports include the June 30, 2015, Net Pension Liability so that employers can use the data for the calculation of their pension expense. The enhanced data is included in Schedule B of both the audited report and Excel Tables.

A brief example of how to use this information is included in both the CERS and KERS Excel workbooks.

KRS recommends that each employer review the GASB 68 audited report and Excel tables with its external auditor to ensure that it has met all the requirements of the statement, and to ensure that the required calculations have been performed correctly and accurately.

Excel format of the schedules.
In June 2012, the Governmental Accounting Standards Board (GASB) issued two new statements that change the way a state and local government retirement system like Kentucky Retirement Systems (KRS), and its participating government employers, disclose pension information. All financial disclosures made by KRS are contained in its audited financial statements and the KRS Comprehensive Annual Financial Report (CAFR) that is published annually. Statement No. 67, Financial Reporting for Pension Plans, affects the financial statements for KRS. Statement No. 68, Accounting and Financial Reporting for Pensions, affects the financial statements of employers.
KRS administers both cost-sharing multiple-employer defined benefit pension plans (KERS and CERS), which provide pension benefits to the employees of more than one employer, and a single employer defined benefit pension plan (SPRS), which provides pension benefits to the employees of only one employer. KERS, CERS and SPRS serve as the retirement plans for more than 1,492 public employers in Kentucky. Both of these plans are impacted by the new statements.
Statement No. 67 replaced the requirements of Statement No.25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and is effective for fiscal years beginning after June 15, 2013. KRS has complied with these new requirements in its 2013-14 financial statements and its CAFR.
Statement No. 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. This reporting requirement applies to KRS participating employers effective for fiscal years beginning after June 15, 2014.
These Statements also replace the requirements of Statement No. 50, Pension Disclosures.
According to GASB, “the new Statements relate to accounting and financial reporting issues only -- how pension costs and obligations are measured and reported in audited external financial reports. The Statements do not address how governments approach pension plan funding – a government’s policy regarding how much money it will contribute to its pension plan each year.” The changes are designed to improve pension information and increase the transparency, consistency, and comparability of pension information across governments.
Although it is not required to do so by either GASB Statement 67 or 68, KRS has provided employers with the information necessary to meet the employer accounting and reporting requirements established by Statement 68.
Statements 67 and 68 has changed current pension accounting and reporting standards in the following ways:
• Pension accounting and reporting is divorced from pension funding. Under current standards, pension accounting and pension funding are closely connected. The Actuarially Required Contribution (ARC) is a part of the required information under Statements 25 and 27 and has been the ad hoc funding standard for many public pension plans. Under the new statements, there is no required ARC. Plans will have to adopt a funding policy that is separate from accounting and reporting requirements. KRS adopted a funding policy in 2013. The KRS Funding Policy can be read at this link.
• Employers need to recognize and report on financial statement balance sheets their proportionate share of the plan’s Net Pension Liability (NPL), which is the plan’s Total Pension Liability (TPL) (now the actuarial accrued liability) less the plan’s Fiduciary Net Position (FNP), which is the market value of plan assets.
• Employers are required to recognize and report on their financial statements an annual “Pension Expense” (PE), which will have no direct relationship to the ARC. The annual Pension Expense will be the Normal Cost, calculated using the Entry Age Normal actuarial method, plus interest on the employer’s proportionate share of the Net Pension Liability (NPL). In addition, the calculation of the Pension Expense will include immediate recognition of changes in active and inactive liability due to plan amendments; deferred recognition (over average remaining service life) of changes due to assumption changes and actual experience; and, deferred recognition of investment gains and losses over five years.
According to GASB, these new standards better align the recognition of pension expense with the period in which related benefits are earned. In total, the changes will have the overall effect of accelerating expense recognition.
• Employers and KRS have to revise their financial note disclosures and required supplementary information in their financial statements based on the new statement requirements
KRS’ actuary, Cavanaugh Macdonald, calculated each employers proportionate share of the KERS and CERS plan’s Net Pension Liability (NPL) and Pension Expense (PE) and KRS provided this information to its participating employers in an annual report.

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