Upcoming pension changes – part III

If your government has employees who are part of the Minnesota Public Employees’ Retirement Association (PERA), Teachers’ Retirement Association (TRA), and/or Minnesota State Retirement System (MSRS) General Plan, this article will be of interest to you. It addresses some of the specific implementation matters of the new pension reporting.

As reported in our "Upcoming pension changes – part I" article last fall, upcoming pension changes related to the issuance GASB No. 67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25 and GASB No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, will be forthcoming. GASB No. 67, which impacts the pension plan, is effective for fiscal years beginning after June 15, 2013, or June 30, 2014, year ends. GASB No. 68, which impacts the employer, is effective one year after GASB No. 67 for fiscal years beginning after June 15, 2014, or June 30, 2015, year ends. PERA, TRA and MSRS have been reviewing the new standards and expect to have data available for participating employers to use in preparing their financial statements.

The following table briefly addresses the PERA, TRA, and MSRS plans for implementation. This was derived from information distributed and/or presented by PERA, TRA and MSRS personnel. This information is subject to change.

Implementation matterPERATRAMSRS General Plan
Type of pension planCost-sharing multiple employerCost-sharing multiple employerCost-sharing multiple employer (Note: The General Plan under the State Employees Retirement Fund is specifically addressed here; there are other portions of the system that are considered single employer plans.)
Discount rateExpects to be able to use the long-term expected rate of return on pension plan investmentsUndetermined at this timeExpects to be able to use the long-term expected rate of return on pension plan investments for the General Plan
Actuarial cost method - financial reportingEntry age normal actuarial cost methodEntry age normal actuarial cost methodEntry age normal actuarial cost method
Actuarial cost method - funding purposesEntry age (rates set by state statutes, however)Entry age (rates set by state statutes, however)Entry age (rates set by state statutes, however)
Timing and frequency of valuationsAn annual actuarial valuation is performed as of June 30 each yearAn annual actuarial valuation is performed as of June 30 each yearAn annual actuarial valuation is performed as of June 30 each year
Measurement dateThe net pension liability and related disclosure information will be provided using a measurement date of June 30th each yearThe net pension liability and related disclosure information will be provided using a measurement date of June 30th each yearThe net pension liability and related disclosure information will be provided using a measurement date of June 30th each year
Proportionate shareThe net pension liability will be allocated to all employers based on their proportionate share of employer contributionsThe net pension liability will be allocated to all employers based on their proportionate share of employer contributionsThe net pension liability will be allocated to all employers based on their proportionate share of employer contributions
Audit of the Net Pension LiabilityExpected that the net pension liability, basis for allocation and "Schedule of Plan Amounts" (to determine employer's deferred outflows, deferred inflows and pension expense) will be audited by the PERA auditor prior to distribution to the employers. However, this topic is still being discussed.Expected that the net pension liability, basis for allocation and "Schedule of Plan Amounts" (to determine employer's deferred outflows, deferred inflows and pension expense) will be audited by the TRA auditor prior to distribution to the employers. However, this topic is still being discussed.Expected that the net pension liability, basis for allocation and "Schedule of Plan Amounts" (to determine employer's deferred outflows, deferred inflows and pension expense) will be audited by the MSRS auditor prior to distribution to the employers. However, this topic is still being discussed.
Notes to financial statements and required supplementary informationSuggested language and appropriate data will be provided to the employers to comply with the disclosure requirementsSuggested language and appropriate data will be provided to the employers to comply with the disclosure requirementsSuggested language and appropriate data will be provided to the employers to comply with the disclosure requirements
Cost to implementThe data needed to comply with the GASB 68 reporting requirements will be provided and paid for by the PERA trust fund. It is not known if there will be a special assessment to employers for this service.The data needed to comply with the GASB 68 reporting requirements will be provided and paid for by the TRA trust fund. It is not known if there will be a special assessment to employers for this service.The data needed to comply with the GASB 68 reporting requirements will be provided and paid for by the MSRS trust fund. MSRS will bear these costs.

Please note that the information provided above focuses on the PERA, TRA and MSRS General Plans. Many local governments around the country also have individual pension plans for some of their employees (e.g., police and firefighters’ pension plans). In the case of single-employer plans, the individual government sponsoring the pension plan will be responsible for the plan’s implementation of GASB No. 67 and providing the necessary information to the employer so that the employers can properly implement GASB No. 68. It is recommended that entities with single-employer plans begin preparations by contacting their actuary to determine the best course of action for the implementation of GASB No. 67 and GASB No. 68. GASB has also issued a pension implementation toolkit, which is available on the GASB website at no cost. Various fact sheets and informational videos on this topic are available on the GASB website as well.

Details on the Wisconsin Retirement System, the Illinois Municipal Retirement Fund and the Teachers’ Retirement System of Illinois are available in our previous issue under "Upcoming pension changes – part II".

For more information on this topic, or to learn how Baker Tilly state and local government specialists can help, contact our team.