Financial Resource Center
GASB Questions & Answers
Here are answers to some frequently asked questions about the new pension accounting and financial reporting requirements:
GASB is an independent, non-profit, non-governmental regulatory body charged with setting authoritative standards of accounting and financial reporting for state and local governments. Those standards become generally accepted accounting principles.
GASB Statement No. 67, which replaces the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans, became effective for PERA in 2014. The new requirements were included in PERA's CAFR starting 6/30/14
GASB Statement No. 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers and Statement No. 50, Pension Disclosures. Local governments that prepare GAAP-based financial statements began implementing the new requirements in their 2015 financial statements. GASB 27 is effective for fiscal years beginning after June 15, 2014.
PERA's plans are multiple-employer cost sharing plans. Each employer will be required to include a proportionate share of the "net pension liability" (similar to the unfunded liability) of each plan the employer participates in on the face of the employer's government-wide financial statements. Similarly, a proportionate share of each plan's pension expense and deferred inflows of resources and deferred outflows of resources will be required to shown on the face of the employer's government-wide financial statements. In addition, GASB 68 requires each employer to include extensive footnote disclosures and required supplementary information schedules in their financials. Finally, employer contributions to PERA will no longer be included in pension expense, but will instead be included in deferred outflows of resources or directly offset the net pension liability.
No. Although GASB 68 requires that each employer's proportionate share of PERA's net pension liability (unfunded liability) be shown on the face of their government-wide financial statements, contribution requirements to PERA are not impacted by this change. Only Minnesota's legislature has the power to change contribution rates. The net pension liability is unlike any of the other liabilities reported on an employer's balance sheet, in that it is not due in the near future and cannot be paid off under any accelerated schedule. An employer is not able to make additional payments to PERA to remove the net pension liability from their financial statements.
No. The new GASB statements do not affect the amount employers will ultimately pay to fund pensions. They only change how pension costs are accounted for and reported in financial statements.
Yes. PERA will provide employers with two schedules, along with information needed to prepare required supplementary information and footnote disclosures. One of the schedules will be a Schedule of Employer Allocations, which will provide the proportionate relationship of each employer to all employers and each employer's allocation percentage. The second schedule will be a Schedule of Pension Amounts by Employer, which will provide each employer with their piece of the net pension liability, deferred inflows/outflows of resources by category, and pension expense. It's important to note that PERA can only provide the allocation percentage at the level each employer reports contributions to PERA. Each separate Employer ID (6-digit reporting entity) will receive an allocation of pension amounts. If one employer reports contributions to PERA using two or more Employer IDs, or if an employer is a primary government with component units or is a component unit of a separate government, employers may need to perform further allocations or roll-ups of pension-related amounts based on their financial reporting structure.
In accordance with GASB 68, PERA will calculate the allocation percentage (proportional share) using the current year's employer contributions on an accrual basis based on PERA's fiscal year end of June 30. To determine which fiscal year a contribution falls into, the "paid date" will be used.