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Communicating the Facts on GASB 68

Communicating the Facts on GASB 68. Presented by: [Insert Name]. About GASB 68. GASB stands for the Governmental Accounting Standards Board

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Communicating the Facts on GASB 68

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  1. Communicating the Facts on GASB 68 Presented by: [Insert Name]

  2. About GASB 68 • GASB stands for the Governmental Accounting Standards Board • It is the governing body that sets best practices and issues “statements” that set the standard for public sector accounting and financial reporting • GASB 68 is a new requirement that changes the way government entities that offer defined benefit plans report pension liabilities • The most notable change is the separationof accounting calculations from funding calculations • The statement does not apply to post-employment health benefits (OPEB)

  3. Summary of the Change

  4. Summary of the Change, cont. • Currently, government entities include only the yearly contributions required to cover pension benefits on the balance sheets in their annual reports • Under GASB 68, government entities will be required to include the total long-term cost of benefits as a liability on the balance sheets • A similar total long-term cost of benefits, called Unfunded Accrued Liability, was included prior annual reports, but was not listed on the balance sheet • This goes into effect for all annual reporting after June 15, 2014

  5. Unfunded Accrued Liability (UAL) • Before GASB 68 statement, we disclosed long-term pension liability, called UAL, in our footnotes • This long-term pension liability was calculated the following way: Actuarial Accrued Liability Actuarial Value of Assets UAL • The value of pension plan investments • This calculation uses a smoothed asset value, which causes the amount to be different than the amount actually held in the trust for the plan (market value of assets) • The total value of benefits earned by members under a plan to date • This number uses the actuarial assumed rate of return, which is currently 8%

  6. A New Calculation • After GASB 68 statement, we need to disclose a new calculation of long-term pension liability, called Net Pension Liability on our balance sheet • This new calculation is calculated the following way: Fiduciary Net Position Total Pension Liability • This number is similar to the Actuarial Accrued Liability, however for some plans the number will be calculated using a different discount rate • The actual amount of assets held in the pension trust for a plan at the measurement date (market value of assets) NPL

  7. What Will This Mean for Our Municipality? • Though these new long-term pension number may seem different, the current financial situation of our retirement plan has not changed • The new requirement will not change how much we are required to contribute to our plan each year • Our retirement plan is part of MERS, however each plan is maintained in a separate trust • This means we get the benefits of pooling resources for investments while maintaining the integrity and individuality of our plan

  8. How Will MERS Help Us? • MERS will work closely with us to provide all of the information required to comply with new reporting rules • Information will come in two pieces, the annual actuarial valuation and the annual financial report • There is no need to hire an actuary on our own • MERS is available to answer any of our questions • MERS is also available to assist us in answering any questions with local media and the public • Again, while the new requirement will provide an accurate picture of all future costs, it may overstate a government entity’s current financial challenges, causing confusion and overreaction • The MERS team has been trained to explain the issues clearly • They will work in partnership with us to deliver a consistent message across the state and to our local media

  9. Choose an implementation timeline from the following slides based on your fiscal year

  10. June – November Fiscal Years

  11. December Fiscal Years

  12. January – March Fiscal Years

  13. April – May Fiscal Years

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