Public Employees Retirement Association of Minnesota An Overview of GASB 68 for Cost-Sharing Plans Dave DeJonge Assistant Executive Director, PERA

Public Employees Retirement Association of Minnesota Effective Date: Fiscal years beginning after June 15, /30/15 or 12/31/15

Public Employees Retirement Association of Minnesota Agenda Background Net Pension Liability Pension Expense Deferred Inflows/Outflows of Resources Footnote Disclosures RSI Schedules

Public Employees Retirement Association of Minnesota Background Current Standards: GASB Statements 25 & 27 Pension costs are directly related to funding.

Public Employees Retirement Association of Minnesota Pensions are part of an employee/employer exchange A pension is the deferred piece of total compensation Employers incur pension obligations as a result of the “employment exchange” Pension expense should be recognized in the period services are provided, not when they are paid Fundamental New Approach by GASB

Public Employees Retirement Association of Minnesota Fundamental New Approach by GASB Employers are primarily responsible for the unfunded pension obligation Net Pension Liability (NPL) = Plan Assets – Plan Liabilities Employers need to book the NPL as a liability on government-wide financials

Public Employees Retirement Association of Minnesota Background Employers include their proportional share of the NPL and Pension Expense on the face of their government-wide financial statements. Each employer’s proportional share will be determined based on contributions paid to PERA during the measurement period. New extensive footnote disclosures will be required. Two new RSI schedules will be required.

Public Employees Retirement Association of Minnesota Net Pension Liability (NPL) Equal to PERA’s Total Pension Liability (TPL) minus PERA’s Fiduciary Net Position Measured as of June 30 annually Proportionate share of the NPL is reported on the employer’s Statement of Net Position TPL - FNP = NPL

Public Employees Retirement Association of Minnesota Net Pension Liability (NPL) The NPL will be allocated to all of PERA’s employers and included as a liability on the government-wide financial statements. The allocation method will be based on employer’s contributions paid to PERA in relationship to all employer contributions received.

Public Employees Retirement Association of Minnesota Pension Expense (PE) No longer tied to funding (contributions) Directly tied to changes in the NPL from one year to the next Must be calculated by PERA’s actuary Will likely be very volatile May be a negative expense (revenue)

Public Employees Retirement Association of Minnesota Footnote Disclosures GASB 27  Plan Description  Funding Policy  Employer Contributions  Reference to PERA’s CAFR

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)

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

Public Employees Retirement Association of Minnesota Required Supplementary Information (RSI) GASB 27—None required GASB 68—2 new schedules required  Schedule of Proportionate Share of the NPL  Schedule of Employer Contributions

Public Employees Retirement Association of Minnesota What Will PERA Provide? Total Pension Liability (Collective Level) PERA’s Fiduciary Net Position Total Net Pension Liability Total Pension Expense/Deferred Inflows & Outflows Proportionate Share for Each Employer Employer Contributions (Individual and Collective) Footnote Disclosure Information

Public Employees Retirement Association of Minnesota Important Note New accounting numbers are unrelated to funding Contribution rates still set in MN State Statute Funding plan is already in place

Public Employees Retirement Association of Minnesota More Information PERA’s Website   Employers tab  GASB 68 Toolkit Contact Dave DeJonge