2015 CCSA Poster Session NEW ACCOUNTING STANDARDS FOR STRS AND PERS RETIREMENT PLANS Wade McMullen, CPA Derrick DeBruyne, CPA March, 2015

STRS and PERS The State Teachers Retirement System (STRS) and Public Employees Retirement System (PERS) provide cost-sharing, multiple-employer defined benefit plans for many public schools, including charter schools. Many charter schools have recently received letters from these retirement systems alerting them to new accounting rules related to Governmental Accounting Standards Board (GASB) #68. See Exhibit A 2

Impact on Public Schools Sometimes referred to as the “Fund Balance Buster”, GASB 68 requires schools to recognize their proportionate share of the plan’s net pension liability (NPL) in their financial statements. –STRS NPL at June 30, 2014 was $ billion. –Typical charter school’s share is.002% –Results in a calculated liability of approximately $1 million reflected on the financial statements. Now for the good news! 3

FASB Requirements –Financial Accounting Standards Board accounting rules do not require recording the NPL on the financial statements. –95%-99% of charter school organizations follow Financial Accounting Standards Board accounting rules. –However, there are some disclosure requirements in the financial statements that need to be understood. 4

FASB Disclosure Requirements 1.The amount of employer contributions made to each significant plan and to all plans in the aggregate. 2.An indication of whether the employer’s contributions represent more than five percent of total contributions to the plan. 3.An indication of which plans, if any, are subject to a funding improvement plan or rehabilitation plan. 4.The expiration date(s) of the collective bargaining agreement(s) and any minimum funding arrangements. 5.The most recent certified funded status of the plan, as determined by the plan’s “zone status” under the Pension Protection Act of If the “zone status” is not available, an employer will be required to disclose whether the plan is less than 65% funded, between 65% funded and 80% funded, or at least 80% funded. 5

Guidance for Disclosure Preparation –The intent of the FASB Standard is to enable employers to simply and inexpensively prepare the disclosure from information already provided by the plans. –Employers should keep and compile all multiemployer defined benefit pension plan notices received throughout the year and present them to their accountant for purposes of complying with the FASB standard. –In most cases these notices, along with school contribution records, will provide all of the detail accountants will need to prepare the disclosure efficiently and relatively inexpensively. 6