MNCPA Audits of Local Governments Conference

Report
Public Employees Retirement Association of Minnesota
The Nuts and Bolts of GASB 68
Implementation
Dave DeJonge
Assistant Executive Director, PERA
Public Employees Retirement Association of Minnesota
Agenda
 GASB 68—Key Concepts
 GASB 71
 Audit Issues
 Fire Relief Associations
2
Public Employees Retirement Association of Minnesota
GASB 68
Replaces GASB
Statements 27 & 50
Effective for fiscal years
beginning after June 15,
2014
Early implementation is
discouraged!
3
Public Employees Retirement Association of Minnesota
Why are the Standards Changing?
 GASB 27 issued in 1994
 GASB 34—Government-Wide Financial Statements
using Accrual Accounting
 Concepts Statement No. 4—Defined “Liability”
 Survey of Financial Statement Users
 Transparency, Accountability, Comparability
4
Public Employees Retirement Association of Minnesota
Fundamental New Approach by GASB
 Pension expenses tied to when the services are
rendered, not when paid
 Pension costs no longer tied to funding
 Employers are primarily responsible for
the unfunded pension obligation
 Employers need to book their
proportional share of PERA’s
unfunded liability as a liability
on their government-wide financials
5
Public Employees Retirement Association of Minnesota
Total Pension Liability (TPL)
 Calculated annually by PERA’s actuary, similar to
actuarial accrued liability
 Defined in GASB 67 as the portion of the actuarial
present value of projected benefit payments that is
attributed to past periods of service but reflects



Anticipated benefit increases
Projected salary growth
Projected future service
 No anticipation for future members
 Likely uses a lower discount rate
6
Public Employees Retirement Association of Minnesota
Pension Plan’s Fiduciary Net Position
 Pension plan’s net assets at fair value (GASB 63)
 Calculated annually by PERA’s accounting staff
 Determined using the same valuation methods used
by the pension plan for purposes of preparing its
statement of fiduciary net position
7
Public Employees Retirement Association of Minnesota
Net Pension Liability (NPL)
 Equal to PERA’s Total Pension Liability (TPL)
minus PERA’s Fiduciary Net Position (similar to
unfunded actuarial accrued liability)
 Measured as of June 30 annually
 Proportionate share of the
NPL is reported on the
employer’s Statement
of Net Position
 Similar to Unfunded OPEB
Obligation (GASB 45)
8
Public Employees Retirement Association of Minnesota
Proportionate Share
 The NPL will be allocated to all of PERA’s employers
and included as a liability on the government-wide
financial statements
 Allocation methodology should be representative of
future contribution effort of the employer
 GASB allows allocation to be based on past
contributions
 GASB does not specify who calculates the
proportionate share
9
Public Employees Retirement Association of Minnesota
Proportionate Share
 AICPA White Paper recommends having the
pension plan calculate proportionate share
 PERA’s allocation method will be based on
employer’s contributions paid to PERA in
relationship to all employer contributions received.
Employer
Contributions
Paid to PERA
(A)
PERA’s Total
ER Contrib.
(B)
Proportionate
Share (%)
(A/B)
PERA’s
Total NPL
(C)
Proportionate
Share of NPL ($)
(A/B) x C
City A
$830,387
$375,000,000
0.221%
$4.5 Billion
$9,945,000
City B
$ 62,590
$375,000,000
0.017%
$4.5 Billion
$765,000
10
Public Employees Retirement Association of Minnesota
Proportionate Share
11
Public Employees Retirement Association of Minnesota
Proportionate Share
Some contributions will be excluded from the allocation because
they do not reflect future contribution effort.
Employer
0006-00
0010-00
0012-00
0014-00
0022-00
0030-00
Total
Regular
Omitted Shortages/
Contrib.
Deductions
AMC
6,111,569.65
340.26
932,024.26
672,103.56
186,583.81
2,113,627.07
460.88
1,009,888.97
2,877.93
373,665,000.00
300,000.00
35,000.00
Contrib.
Accruals
1,200.00
200.00
175.00
50.00
500.00
275.00
Total
GASB 68
6,113,109.91
932,224.26
672,278.56
186,633.81
2,114,587.95
1,013,041.90
1,000,000.00
375,000,000.00
Interest Delinquency
7.80
10.00
10.21
47.32
32.90
EE Paid by
ER (OD)
-
Grand
Total
6,113,127.71
932,224.26
672,278.56
186,633.81
2,114,598.16
1,013,122.12
60,000.00
30,000.00
375,110,000.00
20,000.00
12
Public Employees Retirement Association of Minnesota
Proportionate Share
Schedule of Employer Allocations
As of June 30, 2014
Unit ID
Employer Name
0002-00
0006-00
0008-01
0010-00
0012-00
0014-00
0016-00
0018-00
0020-00
0022-00
0022-09
0024-00
0026-00
0027-00
0028-00
0030-00
0032-00
9115-00
AITKIN COUNTY
ANOKA COUNTY
BECKER COUNTY
BELTRAMI COUNTY
BENTON COUNTY REVENUE
BIG STONE COUNTY
BLUE EARTH COUNTY
BROWN COUNTY
CARLTON COUNTY
CARVER COUNTY
CARVER COUNTY HISTORICAL SOCIETY
CASS COUNTY
CHIPPEWA COUNTY
CHIPPEWA COUNTY SWCD
CHIPPEWA COUNTY HOSPITAL
CHISAGO COUNTY
CLAY COUNTY
CLAY COUNTY SWCD
…
…
Contributions
Allocation
598,539.73
6,113,109.91
814,665.35
932,224.26
672,278.56
186,633.81
1,333,635.98
683,226.74
1,020,241.27
2,114,587.95
9,978.97
849,624.34
353,070.32
9,983.35
980,099.65
1,013,041.90
1,075,596.37
17,500.39
…
375,000,000.00
0.16045%
1.63871%
0.21838%
0.24990%
0.18021%
0.05003%
0.35750%
0.18315%
0.27349%
0.56685%
0.00268%
0.22776%
0.09465%
0.00268%
0.26273%
0.27156%
0.28833%
0.00469%
…
100.00000%
13
Public Employees Retirement Association of Minnesota
Proportionate Share
Unit ID
Employer Name
Contributions
9113-00
9131-00
9133-00
9134-00
9139-00
9140-00
9152-00
9153-00
9155-00
9158-00
9164-00
9165-00
9168-00
9176-01
9180-00
9194-00
9198-00
9200-00
9207-00
9208-00
9212-00
9218-00
CHISHOLM-HIBBING AIRPORT AUTHORITY
LOWER MINNESOTA RIVER WATERSHED DISTRICT
SCHOOLCRAFT LEARNING COMMUNITY
PIONEERLAND LIBRARY SYSTEM
COTTONWOOD-JACKSON HEALTH SERVICE
DOVER-EYOTA ST CHARLES SANITARY DISTRICT
EAST CENTRAL REGIONAL DEV. COMMISSION
RIVERWAY LEARNING COMMUNITY
SOUTHWEST TRANSIT
EAST CENTRAL REGIONAL LIBRARY
RIVER RIDER TRANSIT SERVICE
EXCELSIOR FIRE DISTRICT
EAST RANGE JOINT POWERS BOARD
NATIONAL JOINT POWERS ALLIANCE
HUMAN SERVICES OF FARIBAULT & MARTIN CO
GREAT RIVER REGIONAL LIBRARY
GREENWAY JOINT RECREATION ASSOCIATION
HEADWATERS REGIONAL DEVELOPMENT COMM
RED RIVER WATERSHED MANAGEMENT
GARRISON-KATHIO SANITARY DISTRICT
PENNINGTON-RED LAKE COUNTY NURSING SERVI
MINNESOTA VALLEY EDUCATIONAL DISTRICT
28,944.80
4,358.52
32,262.26
124,406.47
36,131.76
10,322.14
30,945.33
23,008.59
93,145.55
103,102.87
28,827.42
1,293.26
4,001.61
250,757.97
332,469.18
359,649.66
7,360.24
37,205.57
5,628.13
2,969.34
36,180.41
42,035.45
Allocation
0.007759%
0.001168%
0.008648%
0.033349%
0.009686%
0.002767%
0.008295%
0.006168%
0.024969%
0.027638%
0.007728%
0.000347%
0.001073%
0.067220%
0.089124%
0.096410%
0.001973%
0.009974%
0.001509%
0.000796%
0.009699%
0.011268%
14
Public Employees Retirement Association of Minnesota
Proprietary/Fiduciary Funds
 Should the NPL be allocated to other statements
prepared on an accrual basis?
 No allocation requirements in GASB 68
 NCGA Statement 1, paragraph 42--long-term
liabilities should be reported in statement of net
position (fiduciary net position) if:
 Amount is material
 Liability is directly related to the fund
 Liability is expected to be paid from the fund
15
Public Employees Retirement Association of Minnesota
MEASUREMENT DATE
MEASUREMENT PERIOD
16
Public Employees Retirement Association of Minnesota
Measurement Date
 Date at which PERA’s liabilities and assets are
valued to determine the Net Pension Liability (NPL)
 June 30 annually
 Employers choose appropriate Measurement Date
for reporting purposes
 Measurement date must be no earlier than the end
of the employer’s prior fiscal year, consistently
applied from period to period
17
Public Employees Retirement Association of Minnesota
Measurement Period
 Period of time from one measurement date to the
next, during which pension costs are calculated
 PERA’s fiscal year (July 1 – June 30)
June 30, 2014
June 30, 2015
June 30, 2016
June 30, 2017
18
Public Employees Retirement Association of Minnesota
Scenario 1
Reporting Date = December 31, 2015
Measurement Date = ??
Measurement
Date
June 30, 2014
Employer’s Prior
Fiscal Year End
December 31, 2014
Measurement
Date
June 30, 2015
Employer’s Fiscal Year End
(Reporting Date)
December 31, 2015
19
Public Employees Retirement Association of Minnesota
Scenario 1
Reporting Date = December 31, 2015
Measurement Date = June 30, 2015
Measurement Period
Measurement
Date
June 30, 2014
Employer’s Prior
Fiscal Year End
December 31, 2014
Measurement
Date
June 30, 2015
Employer’s Fiscal Year End
(Reporting Date)
December 31, 2015
20
Public Employees Retirement Association of Minnesota
Scenario 2
Reporting Date = June 30, 2015
Measurement Date = June 30, 2015
Measurement Period
Measurement
Date
June 30, 2013
Employer’s Prior
Fiscal Year End
Employer’s Fiscal Year End
(Reporting Date)
Measurement
Date
Measurement
Date
June 30, 2014
June 30, 2015
21
Public Employees Retirement Association of Minnesota
Annual Timeline
 June 30—Fiscal year end (Measurement Date)
 August—Census and asset data sent to actuary
 November—Actuarial valuations finalized
 December 1—PERA prepares GASB schedules
 December—Auditor audits schedules
 December 31—PERA publishes GASB Schedules
22
Public Employees Retirement Association of Minnesota
Scenario 2
Reporting Date = June 30, 2015
Measurement Date = June 30, 2014
Measurement Period
Measurement
Date
June 30, 2013
Employer’s Prior
Fiscal Year End
Employer’s Fiscal Year End
(Reporting Date)
Measurement
Date
Measurement
Date
June 30, 2014
June 30, 2015
23
Public Employees Retirement Association of Minnesota
PENSION EXPENSE &
DEFERRED AMOUNTS
24
Public Employees Retirement Association of Minnesota
Pension Expense
 GASB 27
 Employer contributions made during employer’s fiscal
year
 Easy to calculate
 Easy to audit
25
Public Employees Retirement Association of Minnesota
Pension Expense
 GASB 68
 Tied to when pension liability is incurred (services are rendered),
not when it is funded
 Change in NPL during measurement period +/- deferrals
 Calculated by PERA’s actuary
 Will likely be volatile from year to year
 May be a negative expense (revenue)
 Can’t be calculated by employers
26
Public Employees Retirement Association of Minnesota
Pension Expense
 Expensed immediately:
 Current period service cost (normal cost)
 Interest on the beginning total pension liability
 Impact of changes in benefit provisions/terms
 Projected earnings on plan investments
 Other changes in plan fiduciary net position other than
employer contributions or benefit payments (e.g.,
employee contributions, admin costs)
27
Public Employees Retirement Association of Minnesota
Deferred Inflows/Outflows
1. Differences between expected and actual
experience with economic & demographic factors
(actuarial gains and losses during the year):
 Mortality
 Payroll Increases
 Retirements
 Employee Turnover
28
Public Employees Retirement Association of Minnesota
Deferred Inflows/Outflows
2. Effect of changes in assumptions about future
economic and demographic factors (usually as a
result of an experience study):
 Discount Rate
 Mortality Tables
 Future Payroll Increases
 Future Inflation Rate
 Retirements
 Employee Turnover
29
Public Employees Retirement Association of Minnesota
Deferred Inflows/Outflows
3. Differences between actual and projected earnings
on plan investments.
4. Net effect of a change in the employer’s
proportional share.
30
Public Employees Retirement Association of Minnesota
Pension Expense
Change in NPL during measurement period +/- deferrals
Source of Change in NPL
Expense/Deferral
Service (Normal) Cost
Immediate
Interest on the TPL
Immediate
Projected Investment Earnings
Immediate
Changes in Benefit Provisions
Immediate
Actuarial Gains and Losses
Expense over average
remaining service lives of all
actives and in-actives
Changes in Actuarial Assumptions
Changes in Proportionate Share
Differences between Projected and Actual
Investment Earnings
Expense over 5-year closed
period
Other Changes in the NPL
Immediate
31
Public Employees Retirement Association of Minnesota
Pension Expense
Meas.
Date
Item
6/30/15
Service (Normal) Cost
6/30/15
Interest on the TPL
6/30/15
Total Cost
Amtz. Period
Expense
Deferred
Inflow/Outflow
$50,000
NA
$50,000
$0
$100,000
NA
$100,000
$0
Projected Inv. Earnings
($110,000)
NA
($110,000)
$0
6/30/15
Employee Contributions
($25,000)
NA
($25,000)
$0
6/30/15
Ben. Provision Changes
$20,000
NA
$20,000
$0
6/30/15
Change in Actuarial
Assumptions
$18,000
9 Years
$2,000
D.O.
$16,000
6/30/15
Actuarial Gains/Losses
$9,000
9 Years
$1,000
D.O.
$8,000
6/30/15
Change in Proportionate
Share
($900)
9 Years
($100)
D.I.
($800)
6/30/15
Difference between
projected and actual
investment earnings
($40,000)
5 Years
($8,000)
D.I. ($32,000)
32
Public Employees Retirement Association of Minnesota
Schedule of Pension Amounts
COST SHARING PENSION PLAN
Schedule of Pension Amounts by Employer
As of and for the year ended 6/30/2015
Net Pension
Liability
Employer
(NPL)
1234-00 $2,000,000
1245-00 $1,000,000
1350-00
$750,000
Deferred Outflows of Resources
Deferred Inflows of Resources
Difference
Between
Projected and
Differences
Actual
Between Expected Investment
Changes in
and Actual
Earnings on
Actuarial
Experience
Investments Assumptions
(9 year amtz.)
(5 year amtz.) (9 year amtz.)
$8,000
$8,000
$720
$4,000
$4,000
$360
$3,000
$3,000
$270
Differences
Between
Expected and Changes in
Actual
Actuarial
Experience
Assumptions
(9 year amtz.) (9 year amtz.)
$4,000
$0
$2,000
$0
$1,500
$0
Pension
Expense
$10,000
$5,000
$3,750
33
Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differences
between Projected and Actual Earnings on Pension Plan Investments
Year
2015
2016
2017
2018
Difference
between
Projected
and Actual
Earnings on
Investments
$ 102,705
Amtz.
Period
(Years)
5
$
Net Increase (Decrease) in Pens Exp $
2015
2016
2017
2018
2019
20,541 $
20,541 $
20,541 $
20,541 $
20,541
2020
2021
2022
20,541
34
Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differences
between Projected and Actual Earnings on Pension Plan Investments
Year
2015
2016
2017
2018
Difference
between
Projected
and Actual
Earnings on
Investments
$ 102,705
$ (159,517)
Amtz.
Period
(Years)
5
$
5
Net Increase (Decrease) in Pens Exp $
2015
2016
2017
2018
2019
2020
20,541 $
20,541 $
20,541 $
20,541 $
20,541
$ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)
20,541 $
2021
2022
(11,362)
35
Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differences
between Projected and Actual Earnings on Pension Plan Investments
Year
2015
2016
2017
2018
Difference
between
Projected
and Actual
Earnings on
Investments
$ 102,705
$ (159,517)
$ (114,275)
Amtz.
Period
(Years)
5
$
5
5
Net Increase (Decrease) in Pens Exp $
2015
2016
2017
2018
2019
2020
2021
20,541 $
20,541 $
20,541 $
20,541 $
20,541
$ (31,903) $ (31,903) $ (31,903) $ (31,903) $ (31,905)
$ (22,855) $ (22,855) $ (22,855) $ (22,855) $ (22,855)
20,541 $
(11,362) $
2022
(34,217)
36
Public Employees Retirement Association of Minnesota
Expenses/Deferrals
Increase (Decrease) in Pension Expense Arising from the Recognition of Differences
between Projected and Actual Earnings on Pension Plan Investments
Year
2015
2016
2017
2018
Difference
between
Projected
and Actual
Earnings on
Investments
$ 102,705
$ (159,517)
$ (114,275)
$ 117,285
Amtz.
Period
(Years)
5
$
5
5
5
Net Increase (Decrease) in Pens Exp $
2015
2016
2017
2018
20,541 $
20,541 $
20,541 $
20,541
$ (31,903) $ (31,903) $ (31,903)
$ (22,855) $ (22,855)
$
23,457
20,541 $
(11,362) $
(34,217) $
$
$
$
$
2019
2020
2021
2022
20,541
(31,903) $ (31,905)
(22,855) $ (22,855) $ (22,855)
23,457 $ 23,457 $ 23,457 $ 23,457
(10,760)
37
Public Employees Retirement Association of Minnesota
Deferred Balances
Increase (Decrease) in Pension Expense Arising from the Recognition of Differences
between Projected and Actual Earnings on Pension Plan Investments
Balances at June 30, 2018
Year
2015
Investment Earnings
Less Than Projected
Investment
Earnings Greater
Than Projected
Amounts Recognized
in Pension Expense
through June 30,
2018
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
(a)
(b)
(c)
(a) - (c)
(b) - (c)
$82,164
$20,541
$102,705
2016
$(159,517)
$(95,709)
$(63,808)
2017
$(114,275)
$(45,710)
$(68,565)
2018
$117,285
$23,457
$93,828
$114,369
$(132,373)
38
Public Employees Retirement Association of Minnesota
Deferred Balances
Footnote Disclosure
As of June 30, 2018
Difference between projected and actual investment earnings
Changes of assumptions
Differences between expected & actual experience
Changes in proportionate share
Employer contributions subsequent to the measurement date
Deferred
Outflows
of Resources
114,369
Deferred
Inflows
of Resources
132,373
1,714
130
24,675
13,598
82
31
1,065
141,905
0
146,132
39
Public Employees Retirement Association of Minnesota
Scenario 1
Employer contributions paid to PERA between the
Measurement Date and Reporting Date are Deferred
Outflows of Resources, not expenses.
Measurement Period
Measurement
Date
Employer’s Prior
Fiscal Year End
Measurement
Date
Employer’s Fiscal Year End
(Reporting Date)
ER
Contrib
June 30, 2014
December 31, 2014
June 30, 2015
December 31, 2015
40
Public Employees Retirement Association of Minnesota
Future Expenses
Footnote Disclosure
Year ended June 30:
20Y0
20Y1
20Y2
20Y3
20Y4
Thereafter
$ (21,372)
11,593
22,198
19,376
12,450
33,468
This schedule will indicate when the accumulated deferred amounts are
scheduled to be expensed.
41
Public Employees Retirement Association of Minnesota
OTHER NOTE DISCLOSURES
AND RSI SCHEDULES
42
Public Employees Retirement Association of Minnesota
Footnote Disclosures
 GASB 68
 Separate disclosures for each plan
 Extensive note disclosures, including:





Description of benefits (terms, policies and authority)
Contribution requirements (rates, basis and authority)
Actuarial assumptions and discount rate used to measure
total pension liability
Changes in actuarial assumptions
Investment information (asset allocation, rates of return for
each asset class)
43
Public Employees Retirement Association of Minnesota
Footnote Disclosures
 GASB 68 footnote disclosures (contd.)
 Employer’s share and percentage of the NPL
 Balances of deferred inflows and outflows
 NPL using discount rate of +/- one percentage point
 Information required will be provided by PERA
44
Public Employees Retirement Association of Minnesota
Footnote Disclosures
Disclosure
Reference Source
Requirement
Total of employer’s pension liabilities, pension assets,
deferred outflows/inflows related to pensions, and
pension expense for the period (if not identifiable in
financials)
Name of plan, ID of system that administers the plan, ID
as agent or cost-sharing plan
Description of benefit terms, including types of
employees covered, types of benefits, pension
formulas, COLAs, and authority under which benefit
terms are established/amended.
Description of contribution requirements, including
how contributions are determined, how contribution
rates are changed, actual contribution rates, and
amount of contributions recognized by the pension
plan for that period.
How to obtain PERA’s CAFR
74
PERA
New
76.a
PERA or
Employer
PERA or
Employer
Existing
76.c
PERA or
Employer
Existing (with
slight changes)
76.d
Existing
Significant assumptions/inputs used to measure the
total pension liability, including: inflation, salary
changes, COLA’s, mortality, and dates of experience
studies on which assumptions are based.
Discount rate applied when measuring TPL and change
in the discount rate since the prior measurement date,
if any.
77
PERA or
Employer
PERA
78.a
PERA (Actuary)
New
76.b
Existing
New
45
Public Employees Retirement Association of Minnesota
Footnote Disclosures
Assumptions made about projected cash flows
when calculating the discount rate
Long-term expected rate of return and how it was
determined, including significant methods and
assumptions used for that purpose.
If the discount rate incorporates a municipal bond,
the bond rate used and source of that rate.
Periods of projected benefit payments to which
long-term ROR is used and municipal bond rate is
used when determining the discount rate
Assumed asset allocation of portfolio, long-term
expected real ROR for each asset class, and
whether ROR is presented as arithmetic or
geometric.
78.b
PERA (Actuary)
New
78.c
PERA (SBI)
New
78.d
PERA (Actuary)
New
78.e
PERA (Actuary)
New
78.f
PERA (SBI)
New
Employer’s NPL calculated using discount rates
that are 1% higher and lower than the actual
discount rate used to calculate the TPL.
Pension plan’s fiduciary net position has been
determined on the same basis used by the pension
plan, and a brief description of pension plan’s basis
of accounting, including policies regarding benefit
payments and the valuation of plan investments.
78.g
PERA (Actuary)
New
79
PERA
New
46
Public Employees Retirement Association of Minnesota
Footnote Disclosures
Employer’s share of the NPL
80.a
PERA (Actuary)
New
Employer’s percentage of NPL, the basis on which
its proportion was determined, and change in its
proportion since the prior measurement date
80.b
PERA
New
Measurement date of NPL and date of actuarial
valuation on which the TPL is based.
80.c
PERA
New
Assumption changes or other inputs that affected
measurement of the TPL since the prior
measurement date
80.d
PERA
New
Changes of benefit terms that affected
measurement of the TPL since the prior
measurement date
80.e
PERA
New
Nature of changes between measurement date of
collective NPL and employer’s reporting date if they
are expected to have a significant effect on the
employer’s share of the NPL.
80.f
PERA or
Employer
New
Amount of pension expense recognized by the
employer in the reporting period.
80.g
PERA or
Employer
New
47
Public Employees Retirement Association of Minnesota
Footnote Disclosures
Employer’s balances of deferred outflows/inflows
related to pensions, classified in 5 categories:

Differences between expected and actual
experience

Changes of assumptions/inputs

Difference between expected and actual
earnings

Changes in employer’s proportion and
differences between contributions made and
employer’s proportionate share of
contributions

Employer’s contributions to the pension plan
subsequent to the measurement date
80.h
PERA and
Employer
New
Schedule showing net amount of balances of
deferred outflows/inflows that will be recognized in
the employer’s pension expense and recognized as
a reduction in the collective net pension liability in
the future.
80.i
PERA and
Employer
New
Amount of revenue recognized for the support
provided by non-employer contributing entities, if
any.
80.j
Employer
New
48
Public Employees Retirement Association of Minnesota
Required Supplementary Information (RSI)
 GASB 27—None required
 GASB 68—2 new 10-year schedules required
 Schedule of Proportionate Share of the NPL
 Schedule of Employer Contributions
 Separate schedule for each plan
 Notes to RSI will include significant changes in
actuarial assumptions, benefit provisions, etc. that
affect the identification of trends in RSI schedules.
49
Public Employees Retirement Association of Minnesota
Schedule of Proportionate Share of the NPL
CITY’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
PERA General Employees Retirement Fund
Last 10 Fiscal Years* (Dollar amounts in thousands)
6/30.
50
Public Employees Retirement Association of Minnesota
Schedule of Employer Contributions
PERA General Employees Retirement Fund
Last 10 Fiscal Years
(Dollar amounts in thousands)
51
Public Employees Retirement Association of Minnesota
GASB 71
52
Public Employees Retirement Association of Minnesota
GASB 71
 Amends transition provisions found in paragraph 137
of Statement 68
 Allows all deferred inflows and outflows related to
pensions to start at 0…except employer
contributions
 Employer contributions included in initial
measurement period but already expensed (closed
to net position) are to be reclassified
 Adjusts deferred outflows and net position
53
Public Employees Retirement Association of Minnesota
GASB 71
 Employer contributions already expensed during
initial measurement period are reclassified
Measurement Period
Measurement
Date
Employer’s Prior
Fiscal Year End
Measurement
Date
Employer’s Fiscal Year End
(Reporting Date)
ER
Contrib
June 30, 2014
December 31, 2014
June 30, 2015
December 31, 2015
54
Public Employees Retirement Association of Minnesota
Transition Year Journal Entries
 Employer contributions already expensed during
initial measurement period are reclassified
Measurement Period
Measurement
Date
NPL: $2,500,000
Employer’s Prior
Fiscal Year End
Measurement
Date
NPL: $2,650,000
Employer’s Fiscal Year End
(Reporting Date)
$45,000
June 30, 2014
December 31, 2014
June 30, 2015
December 31, 2015
55
Public Employees Retirement Association of Minnesota
Transition Year Journal Entries
1) To record beginning net pension liability (6/30/14)
Net Position
Net Pension Liability
$2,500,000
$2,500,000
2) To record ER contributions expensed in previous
year but fall within measurement period
Deferred Outflow
Net Position
$
45,000
$
45,000
56
Public Employees Retirement Association of Minnesota
AUDIT ISSUES
57
Public Employees Retirement Association of Minnesota
Audit Issues
 AICPA issued 3 whitepapers



Issues Related to Information for Employer Reporting—Cost
Sharing Plans
Issues Associated with Testing Census Data
Issues Related to Information for Employer Reporting—
Agent Multiple-Employer Plans
 Issued Interpretations to 3 AU-C sections




AU-C 500
AU-C 600
AU-C 805
Moving to audit guide next year
 Links on www.aicpa.org (Search for “GASB Matters”)
58
Public Employees Retirement Association of Minnesota
Audit Issues--Problem
 Audited financial statements of the plan only include
disclosure of the collective net pension liability for
the plan as a whole. They do NOT include:
• Deferred outflows/inflows of resources by category
• Pension expense
• Each participating employer’s share of collective
pension amounts
 Audited financial statements of the plan may not
include necessary information to calculate allocation
percentages
59
Public Employees Retirement Association of Minnesota
Audit Issues--Problem
 GAAP financial statements of the plan and additional
unaudited information from the plan will NOT provide
sufficient appropriate audit evidence for the
governmental employer auditor.
 Absent additional audit evidence from the cost-sharing
plan, the employer auditor would not likely be able to
accumulate sufficient appropriate audit evidence.
 If unable to accumulate sufficient appropriate
evidence, the employer auditor should modify the audit
opinion.
(AU-C section 9500, Question 2)
60
Public Employees Retirement Association of Minnesota
Audit Issues--Solution
 Plan prepares “schedule of employer allocations” for
which plan auditor is engaged to provide opinion
 Use allocation method based on covered payroll or
actual contributions if they are expected to be
representative of future contributions
 This schedule does not need to be included in the
plan’s CAFR
61
Public Employees Retirement Association of Minnesota
Audit Issues--Solution
62
Public Employees Retirement Association of Minnesota
Audit Issues--Solution
 Plan prepares “Schedule of Pension Amounts by
Employer” for which plan auditor engaged to provide
opinion
 Schedule includes the following elements for each
employer:
•
•
•
•
Net pension liability
Deferred outflows of resources by category
Deferred inflows of resources by category
Pension expense
 An alternative would be to prepare a “Schedule of
Collective Pension Amounts” for the plan as a whole
63
Public Employees Retirement Association of Minnesota
Audit Issues--Solution
COST SHARING PENSION PLAN
Schedule of Pension Amounts by Employer
As of and for the year ended 6/30/2015
Net Pension
Liability
Employer
(NPL)
1234-00 $2,000,000
1245-00 $1,000,000
1350-00
$750,000
Deferred Outflows of Resources
Deferred Inflows of Resources
Difference
Between
Projected and
Differences
Actual
Between Expected Investment
Changes in
and Actual
Earnings on
Actuarial
Experience
Investments Assumptions
(9 year amtz.)
(5 year amtz.) (9 year amtz.)
$8,000
$8,000
$720
$4,000
$4,000
$360
$3,000
$3,000
$270
Differences
Between
Expected and Changes in
Actual
Actuarial
Experience
Assumptions
(9 year amtz.) (9 year amtz.)
$4,000
$0
$2,000
$0
$1,500
$0
Pension
Expense
$10,000
$5,000
$3,750
64
Public Employees Retirement Association of Minnesota
Audit Issues—Census Data
 Underlying census data from employers should be
tested by plan’s auditor
 Risk-based approach by plan auditor to select
employers to test (review payroll registers).
Size of Employer:
 Largest employers (e.g. > 5% of plan) tested on a 5-
year cycle (Hennepin County)
 Smallest employers will never be tested (e.g. 1100
employers represent 2% in aggregate of plan)
 Everyone else tested on a 10-year cycle
65
Public Employees Retirement Association of Minnesota
Audit Issues—Census Data
 Other risk factors to consider:
 Past errors or control deficiencies of an employer
 New employer
 Whether employer financial statements have received
unmodified opinions
 Length of time since procedures last performed for an
employer
 News stories
66
Public Employees Retirement Association of Minnesota
Audit Issues—Census Data
 Plan auditor selects which employers should be
tested each year
 Plan auditor may engage local government auditors
in accordance with AT (Attest) Section 101 to
provide opinion on accuracy of census data reported
to plan
67
Public Employees Retirement Association of Minnesota
Audit Issues
 Actuarial valuation reports will be posted on PERA’s
website
 Two valuation reports for each plan
 GASB 67/68 Compliant
 Funding
 Use to verify collective level
pension costs
68
Cost-Sharing Plans: Employer Responsibilities
Report
Evaluate
Verify &
Recalculate
• Complete and accurate census data to
plan
• Appropriateness of information used to
record financial statement amounts
• Whether plan auditor’s report on
schedules are adequate and appropriate
for employer purposes
• Amounts in schedules specific to employer
• employer amount used in allocation percentage
(numerator)
• recalculate allocation percentage of employer
• recalculate allocation of pension amounts based on
allocation percentage of employer
American Institute of CPAs®
Governmental Audit Quality Center
69
Cost-Sharing Plans: Employer Auditor
Responsibilities
Determine
Evaluate
• Sufficiency and appropriateness of audit evidence
• Whether plan auditor’s report on schedules are
adequate and appropriate for auditor purposes
(e.g., evidence)
•
•
•
Verify &
Recalculate
• Amounts in schedules specific to employer
•
•
•
Test
American Institute of CPAs®
Review plan auditor’s report and any related
modifications
Evaluate whether plan auditor has necessary competence
and independence
Determine whether named as specified user
Employer amount used in allocation percentage
(numerator)
Recalculate allocation percentage of employer
Recalculate allocation of pension amounts based on
allocation percentage of employer
• Census data submitted to plan
Governmental Audit Quality Center
70
Public Employees Retirement Association of Minnesota
FIRE RELIEF ASSOCIATIONS
71
Public Employees Retirement Association of Minnesota
Fire Relief Associations
 Office of the State Auditor’s June 2014 Pension
Division Newsletter
 Cities that prepare financial statements in accordance
with GAAP need to include the NPL and pension
expense of the affiliated relief association


If amounts are material
If the fire department is a city fire department (not an
independent non-profit firefighting corporation)
 Alternative to costly actuarial valuation—accept liability
amounts calculated using State Auditor’s annual
Schedule Form if difference is not significant
72
Public Employees Retirement Association of Minnesota
Fire Relief Associations
 Most relief associations are overfunded, so NPL will
be a Net Pension Asset.
 Work with relief associations and cities now!
 Cities/Townships whose fire departments have joined
PERA’s Statewide Volunteer Firefighter Retirement
Plan will be provided with GASB 68 schedules
73
Public Employees Retirement Association of Minnesota
Single/Agent Plans
 Fewer footnote disclosures
 One additional footnote schedule
 Schedule of Changes in the Net Pension Liability
 One additional RSI schedule
 10-year Schedule of Changes in the NPL
74
Public Employees Retirement Association of Minnesota
Changes in the NPL Note Disclosure
Increase (Decrease)
Balances at 6/30/X8
Changes for the year:
Service cost
Interest on the TPL
Differences between expected and actual experience
Contributions--employer
Contributions--employee
Net investment income
Benefit and refund payments
Administrative expenses
Other changes
Net changes
Balances at 6/30/X9
Total Pension
Liability
(a)
$2,853,455
Plan Fiduciary
Net Position
(b)
$2,052,589
Net Pension
Liability
(a) - (b)
$800,866
79,713
31,451
196,154
(119,434)
(3,373)
8
184,519
2,237,108
75,864
216,515
(37,539)
(79,713)
(31,451)
(196,154)
3,373
(8)
(49,113)
751,753
75,864
216,515
(37,539)
(119,434)
135,406
2,988,861
75
Public Employees Retirement Association of Minnesota
More Information
 PERA’s Website
 www.mnpera.org
 Employers tab
 GASB 68 Toolkit
 Contact Dave DeJonge
[email protected]
76

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