Pension Regulations Presented by David Maccoux, CPA, Shareholder December 4, 2014 Presented by David Maccoux, CPA, Shareholder

GASB Pronouncements and Effective Dates GASB Statement No. 67, Financial Reporting for Pension Plans Effective for fiscal years beginning after June 15, 2013 Establishes pension accounting and financial reporting standards for pension plans, including the Wisconsin Retirement System GASB Statement No. 68, Accounting and Financial Reporting for Pensions Effective for fiscal years beginning after June 15, 2014 Establishes pension accounting and financial reporting standards for employers, including all employers participating in the Wisconsin Retirement System Restatement of beginning net position is required

GASB Pronouncements and Effective Dates GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date Effective for fiscal years beginning after June 15, 2014 Address contributions to pension plan, when other deferred outflows/inflows of resources are not available

GASB’s Purpose Improve the decision-usefulness of reported pension information Enhance transparency, consistency and comparability in reporting pension activity between governments, with the total pension liability calculated using specific guidelines

Wisconsin Retirement System (WRS) Cost-sharing multiple-employer defined benefit plan Pool assets and obligations, meaning that WRS assets can be used to pay the pensions of retirees of any participating employer Financial statement amounts and related disclosures will be provided by WRS and their consulting actuary System completes an annual actuarial valuation annually as of December 31st, with valuations generally available by the subsequent June WRS to allocate net pension liability, pension expense and pension related deferrals based on their share of employer contributions. The allocation will be audited by WRS’s auditor prior to distribution No impact on funding decisions and contribution amounts Importance of WRS census data Employer’s projected long-term contributions to WRS / projected long-term contributions to the plan by all employees

Key Implementation Dates for You Valuation Date Plan: December 31, 2014 Measurement Date Plan: December 31, 2014 Employer: December 31, 2014 Reporting Date (1) Employer: June 30, 2015 or December 31, 2015 (1) GASB 67 requires the plan’s measurement date and reporting date to be the same date while GASB 68 allows you to pick a measurement date no earlier than one year and one day from your reporting date

What has changed? GASB Statement No. 27 GASB Statement No. 68 Pension Expense – Contractually required contributions (Funding Approach) Pension Liability – Unpaid contractual required contributions GASB Statement No. 68 Pension Expense – Benefits earned by employees (Earnings Approach) Net Pension Liability or Net Pension Asset – Employers recognize proportionate share of a Plan’s long-term obligation to provide pension benefits compared to the value of the Plan’s assets available to pay pension benefits in accrual financial statements Additional note disclosures and required supplemental information Additional deferred inflows/outflows of resources reported

Pension Expense Service cost (anticipated costs attributed to this year’s service) + Interest on total pension liability + Changes in benefits, either enhancements or reductions – Employee contributions – Expected earnings on WRS investments + Administrative expenses – Recognition of change in deferred inflows of resources + Recognition of change in deferred outflows of resources = Pension expense (Accrual basis financial statements)

Pension Expense Deferred inflows/outflows of resources Differences between expected and actual experience with regard to economic or demographic factors (i.e. measurement of the total pension liability) Changes of assumptions about future economic or demographic factors or of other inputs (experience gains and losses) Changes in employer’s proportion and differences between employer contributions and employer’s proportionate share of contributions Net difference between projected and actual earnings on pension plan investments Amortize deferred inflows/outflows by average remaining years of service of all members of the plan (not just employer) Amortize investment over 5 years closed

Total Pension Liability Calculation WRS’s consulting actuary Project total future pension benefit payments for current and former employees Discount the projected benefit payments to their value at the time of the measurement (present value) Importance of discount rate Attribute present value to periods when they were or will be earned Must use entry age actuarial cost method, applied only as a level percentage of payroll Discount rate: Long-term expected investment return vs 20 year tax exempt municipal bond rate

Allocation of Net Pension Liability Proportionate share Allocation of your share of the WRS net pension liability or net pension asset, and other related items Employer allocation to specific funds GASB 68 does not require a specific approach to allocating the employer’s proportionate share NCGA Statement No. 1, paragraph 42 (as amended) indicates that long-term liabilities that are directly related to and expected to be paid from proprietary and fiduciary funds should be reported in their respective fund financial statements

Notes to Basic Financial Statements General Information Pension plan description Benefit and contribution information Pension liability disclosures Description of proportionate share calculation Classification of deferred outflows/inflows and 5 year amortization schedule Actuarial assumptions Long-term expected real rate of return Sensitivity of proportionate share of net pension liability to changes in discount rate +1%/-1% from current discount rate

Required Supplementary Information Schedule of your proportionate share of net pension liability Employer proportion (percentage and amount) of net pension liability or net pension asset Employer’s covered-employee payroll Percentage of the net pension liability or asset to covered-employee payroll Fiduciary net position as a percentage of total pension liability Schedule of employer contributions Contractually required contribution and actual contributions Contributions as a percentage of covered-employee payroll

Any questions? Thank you! David Maccoux, CPA 800-676-0829 david.maccoux@schencksc.com 800-676-0829 Thank you!