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Guest Article

Deloitte logo

(From the November 13, 2006 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

GASB Project on Pension Disclosures


The Government Accounting Standards Board (GASB) has initiated a short-term project intended to bring current pension disclosure requirements for governments in line with the enhanced standards GASB adopted for other post-employment benefits ("OPEB") in 2004. Separately and concurrently, GASB is conducting a research project to determine the effectiveness of existing governmental accounting standards for pensions. The results of this research will be used to determine if changes to these accounting standards are needed.

GASB's Tentative Decisions (So Far)

According to a description of the project on GASB's Web site (www.gasb.org), "The objective of this project is to consider whether GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans, and Statement No. 27, Accounting for Pensions by State and local Governmental Employers, should be amended to conform to certain disclosures and required supplementary information (RSI) presentations now required for [OPEB]." Towards that end, at a recent meeting the GASB tentatively agreed to propose that defined benefit pension plans and sole and agent employers disclose the following information in notes to the financial statements:

  • The funded status of the plan as of the most recent actuarial valuation date. Accordingly, plans also would relocate the disclosure of actuarial methods and significant assumptions used in the most recent actuarial valuation from notes to RSI to notes to the financial statements.

  • If the aggregate actuarial cost method is used to determine the annual required contribution of the employer (ARC), the funded status of the plan - and the funding progress presented as RSI - using the entry age actuarial cost method as a surrogate, with explanation that the purpose is to provide information that approximates the funded status and the funding progress of the plan.

  • Narrative disclosures of an informative nature regarding the actuarial measurement process and a reference linking the funded status information disclosed in the notes to the financial statements to the required schedule of funding progress following the notes to financial statements.

  • The method and assumptions used to determine the fair value of investments, if the fair value is based on other than quoted market prices. It was tentatively agreed that defined contribution plans also should disclose this information.

  • Legal or contractual maximum contribution rates, if applicable.

  • Initial and ultimate rate if select and ultimate assumptions are used in the actuarial valuation.

Also, if an employer participates in a cost-sharing plan that does not issue and make publicly available a stand-alone plan financial report prepared in accordance with Statement 25, as amended, and the plan is not included in the financial report of a public employee retirement system or another entity, GASB has tentatively decided to propose the cost-sharing employer should present as RSI in its own financial report schedules of funding progress and employer contributions for the plan. This information would be prepared according to the requirements of Statement 25, as amended. Also, the cost-sharing employer should disclose that the information presented relates to the cost-sharing plan as a whole and provide information to help explain the scale of the information presented relative to the employer.

Exposure Draft Planned for December

GASB is planning to issue an Exposure Draft in December 2006, and it has tentatively agreed the proposal would be effective for periods beginning after June 15, 2007. Additionally, GASB has tentatively decided that, in the initial year of implementation, pension plans and sole and agent employers that use the aggregate actuarial cost method to determine the ARC would be required to present elements of information in the schedule of funding progress using the entry age actuarial cost method as of the most recent actuarial valuation date. In subsequent years, information would be added to that schedule as of subsequent actuarial valuation dates until the requirements of amended Statements 25 and 27 with regard to the minimum number of years or actuarial valuations to be included were met.


Deloitte logoThe information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.

If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Taina Edlund 202.879.4956, Laura Edwards 202.879.4981, Mike Haberman 202.879.4963, Stephen LaGarde 202.879-5608, Bart Massey 202.220.2104, Laura Morrison 202.879.5653, Martha Priddy Patterson 202.879.5634, Tom Pevarnik 202.879.5314, Carlisle Toppin 202.220.2067, Tom Veal 312.946.2595, Deborah Walker 202.879.4955.

Copyright 2006, Deloitte.


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