October 2018 BAR Sabra Sand and Grace Jimenez GASB 68, 73 & 75 Pensions & OPEB October 2018 BAR Sabra Sand and Grace Jimenez

Basis GASB 68 covers all retirement plans through DRS PERS 1,2 and 3 TRS 1,2, and 3 Measurement date is one year behind GASB 73 covers TIAA-CREFF supplemental portion Measurement date is current Both Calculated and reported on a proportionate share basis of the totals for each retirement plan GASB 75 covers Other Postemployment Benefits through PEBB

GASB 68 Calculations use both the DRS PEFI and the DRS CAFR https://www.drs.wa.gov/administration/annual-report/ Note data comes from both the DRS CAFR and the Washington State CAFR Measurement date is a year behind

GASB 68 Start with the Excel workbook-preferably from the prior year We will work on PERS 1 First, update the DRS total values (rows 6-9) This data comes from the DRS FY17 PEFI page 126 shown by plan Amounts stated in thousands-need to multiply by 1,000 to get number to take proportionate amount of

From College Excel worksheet

GASB 68 – Proportionate share Proportionate share of Beginning and ending NPL Deferred outflows Deferred inflows Pension expense Pension contributions Change in proportionate share of ending NPL, DI, DO from prior year Amortized by useful life of plan Plan 1 has no useful life Plans 2/3 useful life changes from year to year - defined by DRS

GASB 68 – Proportionate share – PERS 1 Get proportionate share from the FY17 PEFI Proportionate share is stated as both a number and a percentage For our calculations, we need the percentage PERS 1 proportionate share includes an additional contribution referred to as a PERS Plan 1 UAAL This is the underfunded portion that is getting pulled from PERS 2/3 contributions Need to add both the PERS 1 percentage and the PERS 1 UAAL together to get the correct proportionate share for PERS 1

GASB 68 – Proportionate share – PERS 1 PERS 1 Proportion Plan 1 0.001876% Plan 1 UAAL + 0.113520% Total 0.115396%

GASB 68 – Proportionate share – PERS 1 Move previous year (FY 16) proportionate share up to replace FY 15 data Enter the proportionate share calculated from the two PEFI amounts PERS 1 and PERS 1 UAAL = 0.115396% Then go to the FY PEFI to get the FY 18 Proportionate share amounts as well Need this to calculate proportionate share of current year contributions only In addition, need to get FY18 total contributions Comes from PEFI section “DRS 2018 CAFR Employer and Nonemployer Contributions” (FY17, page 133; FY18, page………) Also stated in thousands

GASB 68 – Proportionate share – PERS 1

GASB 68 – Proportionate share – PERS 1 The Proportionate share percentages are then multiplied across the columns against the DRS totals for each category to get the college’s proportionate share *Some columns with no current year values were hidden for this presentation

GASB 68 – Change in Proportionate share – PERS 1 On the second tab of the workbook, you will need to calculate your change in proportion from the prior year to the current year you are working on This basically takes the prior year amounts and increases or decreases them to adjust for the change in percentage from one year to the next You will need to determine the change in amount for: Ending Net Pension Liability Any Deferred Outflows items Any Deferred Inflows items

GASB 68 – Change in Proportionate share – PERS 1 Update all of the values to be the prior year values that you used last year in your pension liability calculations (FY16) Update the proportionate share amounts to show the FY16 share and then the new FY17 share

The values you will need for you for your entries to adjust your values are any changes in Ending NPL, and any deferred inflows and outflows. A formula is built into the spreadsheet to bring them forward to the first tab

GASB 68 – Proportionate share – PERS 1 Now, you should have all the values to do your T-accounts To begin your T-account calculations Enter your beginning balances (from the prior year calculations) for: Pension Liability Deferred Inflows Deferred Outflows No expense values are carried forward as those were expensed in your financial statements

GASB 68 – Proportionate share – PERS 1 Next, reverse the prior year deferred inflows against pension liability as well as the prior year deferred outflows against pension liability Debit the current year pension expense amount from above to: Expense/pension liability Book current year deferred inflows amounts from above to: Pension liability/deferred inflows Book current year deferred outflows amounts from above to: Deferred outflows/pension liability

GASB 68 – Proportionate share – PERS 1 Make an entry for the change in proportion amounts This gets fully expensed for PERS and TRS plan 1, but amortized for plans 2 and 3 Pension liability/expense Make an entry for the deferred current year contributions (FY18) since we are reporting a year behind Deferred outflows/expense The ending balance in pension liability should equal your Ending net pension liability from the above calculation multiplying the total NPL by your proportionate share percentage. There may be a small round difference due to the calculations as a percentage of thousands. You will need to make an entry to adjust NPL against expense to balance.

GASB 68 – PERS 2/3 and TRS 2/3 PERS 2/3 and TRS 2/3 both have useful lives left This means that you must amortize the change in proportionate liability over that useful life/recognition period as determined by DRS From FY17 DRS PEFI Notes page 131

GASB 68 – PERS 2/3 and TRS 2/3 (decrease in proportionate share) If your change in proportionate liability is a reduction or negative amount in total, it is a deferred inflow The initial entry in the year of the change is: 5281/5265 or Pension Liability/deferred inflow Then you must create a schedule to amortize/expense over the recognition period as determined by DRS in the PEFI

GASB 68 – PERS 2/3 and TRS 2/3 For each year of amortization, the entry is a 5265/6598 or deferred inflow/expense These entries are necessary each year until fully amortized

GASB 68 – PERS 2/3 and TRS 2/3 (increase in proportionate share) If the change in proportionate liability is an increase or positive amount in total, it is a deferred outflow The initial entry in the year of the change is: 1974/5281 or deferred outflow/pension liability For each year of amortization, the entry is a 6598/1974 or expense/deferred inflow These entries are necessary each year until fully amortized

GASB 73 – Pensions not within the scope of GASB 68 GASB 73 applies to pension plans that do not have a dedicated trust - TIAA-CREF Supplemental Retirement Plan The Total Pension Liability (TPL) represents the amount of Supplemental Retirement Plan (SRP) benefits, earned as of the valuation date, expected to be paid to current and future retirees.

GASB 73 State Board sends member data to the Office of the State Actuary to perform the valuation. Valuations are performed every other year (2017, 2019, …) On even years the prior year results are rolled forward to the new measurement date (6/30/2018).

GASB 73 – Proportionate Share Proportionate share is based on annual contributions to the SBRP plan. Employer contributions listed on the Pension/OPEB Disclosure Form were used to calculate FY18 proportionate share. Colleges will either see an increase (deferred outflow) or a decrease (deferred inflow) in proportionate share of the TPL. Plan had an overall decrease in TPL.

GASB 73 – JE, Notes, RSI You will receive an updated Excel workbook for FY18 which will contain: Required journal entry for financial statements Tables required for your Notes to Financial Statements Tables required for your RSI

GASB 75 – Other Postemployment Benefits GASB 75 covers Other Postemployment Benefits Medical Dental Vision For our system, this is the postemployment benefits provided by the PEBB program, administered by the Health Care Authority.

GASB 75 – Who/What Through the PEBB program all CTC’s provide other postemployment benefits to their retirees. OPEB creates implicit and explicit rate subsidies for retirees, that are funded through active employee premiums. The subsidies lower monthly premiums for retirees. Retirees who elect to continue coverage & pay the retiree premiums are receiving OPEB.

GASB 75 – Subsidies Implicit rate subsidy – “blended premium” The total amount by which the premiums are higher for active employees when they are pooled with retired employees than when the active employees are separately rated. Explicit rate subsidy – Flat amount of employer contribution going towards retiree costs

GASB 75 – Biggest Changes On the face of the financial statements, College’s will report their proportionate share of the State’s: OPEB liability (Short & Long-term) Deferred Outflows Deferred Inflows OPEB expense Impact to net position

GASB 75 – Proportionate Share Your proportionate share was calculated using your active, eligible employee headcount for PEBB. Active & enrolled Active & waived Both will be eligible to receive benefits at retirement.

GASB 75 – Calculating your #s OFM did a ton of work for us this year. Spreadsheet allows you to select your College and your journal entry will populate. Most important items for this year: Double check your entry using your proportionate share Double check your tables OFM provided Understand the basics of GASB 75 so you can explain your numbers to your auditor.

GASB 75 – OPEB expense OSA valuation does not take into account the transactions subsequent to the measurement date or the change in proportionate share between agencies. (12 or 14) OFM report does not include FY18 benefit payments made by employers on behalf of employees for retiree subsidies. (14)

GASB 75 – OPEB expense Difference between your OPEB expense table in the Notes and the amount in your financial statement entry should be the transactions subsequent to the measurement date (14)

Questions??