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BenefitsLink Retirement Plans Newsletter
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BULLETIN — Supplement to June 25, 2012 Issue
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[Guidance Overview]
Governmental Accounting Standards Board Improves Pension Accounting and Financial Reporting Standards
[Excerpts from today's GASB press release:]
The Governmental Accounting Standards Board
(GASB) today voted to approve two new standards that
will substantially improve the accounting and
financial reporting of public employee pensions by
state and local governments....
Statement 68 (Employers)
Statement 68 ["Accounting and Financial Reporting
for Pensions"] replaces the requirements of
Statement No. 27, Accounting for Pensions by State
and Local Governmental Employers and Statement No.
50, Pension Disclosures, as they relate to
governments that provide pensions through pension
plans administered as trusts or similar arrangements
that meet certain criteria. Statement 68 requires
governments providing defined benefit pensions to
recognize their long-term obligation for pension
benefits as a liability for the first time, and to
more comprehensively and comparably measure the
annual costs of pension benefits. The Statement also
enhances accountability and transparency through
revised and new note disclosures and required
supplementary information (RSI).
Defined Benefit Pension Plans. The
Statement requires governments that participate in
defined benefit pension plans to report in their
statement of net position a net pension liability.
The net pension liability is the difference between
the total pension liability (the present value of
projected benefit payments to employees based on
their past service) and the assets (mostly
investments reported at fair value) set aside in a
trust and restricted to paying benefits to current
employees, retirees, and their beneficiaries.
The Statement calls for immediate recognition of
more pension expense than is currently required.
This includes immediate recognition of annual
service cost and interest on the pension liability
and immediate recognition of the effect on the net
pension liability of changes in benefit terms. Other
components of pension expense will be recognized
over a closed period that is determined by the
average remaining service period of the plan members
(both current and former employees, including
retirees). These other components include the
effects on the net pension liability of (a) changes
in economic and demographic assumptions used to
project benefits and (b) differences between those
assumptions and actual experience. Lastly, the
effects on the net pension liability of differences
between expected and actual investment returns will
be recognized in pension expense over a closed five-
year period.
Statement 68 requires cost-sharing
employers to record a liability and expense equal to
their proportionate share of the collective net
pension liability and expense for the cost-sharing
plan. The Statement also will improve the
comparability and consistency of how governments
calculate the pension liabilities and expense. These
changes include: ...
...
Statement 67 (Plans)
This Statement ["Financial Reporting for Pension
Plans"] replaces the requirements of Statement No.
25, Financial Reporting for Defined Benefit Pension
Plans and Note Disclosures for Defined Contribution
Plans and Statement 50 as they relate to pension
plans that are administered through trusts or
similar arrangements meeting certain criteria. The
Statement builds upon the existing framework for
financial reports of defined benefit pension plans,
which includes a statement of fiduciary net position
(the amount held in a trust for paying retirement
benefits) and a statement of changes in fiduciary
net position. Statement 67 enhances note disclosures
and RSI for both defined benefit and defined
contribution pension plans. Statement 67 also
requires the presentation of new information about
annual money-weighted rates of return in the notes
to the financial statements and in 10-year RSI
schedules.
Effective Dates and Availability
The provisions in Statement 67 are effective for
financial statements for periods beginning after
June 15, 2013. The provisions in Statement 68 are
effective for fiscal years beginning after June 15,
2014. Earlier application is encouraged for both
Statements.
Statements 67 and 68 will be available for download at no cost from
the GASB website in early August. Bound copies of the Statements
will be available for distribution soon thereafter....
(Governmental Accounting Standards Board)
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Holly Horton, Business Manager
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