1. Post Employment Benefit Accounting Changes Tom Vicente, Aon Hewitt Larry Sigel, ISFIS © Iowa School Finance Information Services, 2015 1

2. Webinar Reminders Use the chat pane – to express your thinking as we pose questions (chat is confidential unless you select chat to all). You can also ask to speak to your colleagues and we’ll turn on your audio. To ask additional questions or provide examples of how things might work in your school To suggest future webinar content To let us know you are still there To let us know of technical difficulties We will get back to you soon if we don’t answer your question during the webinar 2

3. Presenters: Tom Vicente – Lead Retirement Consultant and Actuary Thomas (Tom) G. Vicente is a Partner of Aon Hewitt and is located in our Philadelphia Office. As a Senior Consultant, he has more than twenty (20) years of experience in actuarial, retiree medical and pension consulting services, as well as the administration and communication of retirement programs. Jessica Fenske, Associate Jessica Fenske is an Associate in the Retirement Practice of Aon Hewitt’s Radnor office. Her responsibilities include analysis and programming for a variety of defined benefit and postretirement benefits plans. Kyle Evancho, Associate Kyle is an associate in the Retirement Practice of Aon Hewitt’s Radnor office. With over 5 years of experience with Aon Hewitt, he is responsible for the analysis, programming and reporting for a variety of defined benefit and postretirement benefit plans. He has also provided asset and liability forecasting, plan design and cost-savings analysis, and government compliance work.

4. Agenda GASB 45  GASB 75 Effective dates Why it is changing What is changing and what is not Actuarial methods and amortization period Balance sheet status Additional disclosures Sample Exhibits Implications as it relates to Iowa school finance 4

5. GASB 45 and 75 Iowa School Finance Implications © Iowa School Finance Information Services, 2015 5

6. School Finance Implications Two primary funds see the impact of GASB 45 & 75 General Fund Management Fund (Early Retirement) Q: If the changes enacted by GASB 75 increase a district’s OPEB liability what does this mean to a district? A: It depends on the fund and what you are trying to measure

7. School Finance Implications – General Fund Schools have to effectively keep two sets of books to manage their financial wellbeing in their General Fund Accounting Spending Authority In Iowa, by law, schools are measured by the Department of Education on the amount of surplus Spending Authority they have If a school overspends their Spending Authority it can be subject to sanction and even closure Schools are NOT held accountable for their fund balance by the State (creditors might feel otherwise)

8. School Finance Implications – General Fund An increased OPEB obligation would: Decrease my Fund Balance (and Solvency Ratio) An increased OPEB obligation would not: Decrease my Unspent Authorized Budget

9. School Finance Implications - Management Fund If GASB 75 increases the liability a district’s fund balance would be less than if the change had not occurred (and could even be negative) Early retirement plans are the primary cause of the liability It is a permissible Management Fund expense to pay the early retirement plan costs of employees who voluntarily retire age 55 or higher

10. School Finance Implications - Management Fund However there are a couple of things you have to remind yourself: 1.There is no rate limit on the Management Fund property tax levy 2.Set by Board action annually as part of the budget process So, does a negative fund balance in your Management Fund always signal peril? Not always School may know they need to levy $X each year – they are paying their current obligations on time but are not prefunding the future obligations

11. School Finance Implications So does this mean I don’t really care about GASB 45 & 75 implications? NO! You need to understand these to be able to communicate with your staff, board and public May impact the underwriting process if you borrowing and can cause a district to pay a higher interest rate (especially if you can’t communicate the significance to the rating agency) Great teaching opportunity Helps board understand that they binding future boards for the payment of these obligations (and how much) Important from a property tax rate management perspective

12. More Information If you need your GASB 45 valuation completed for FY 2015 reporting purposes please contact Sean Gibson at ISFIS for pricing and scheduling. Email: sean.gibson@isfis.net Phone: 515-251-5970 sean.gibson@isfis.net If you are not sure whether your district is required to complete GASB 45 for FY 2015 reporting purposes contact your auditor.

13. Thanks for attending, as always let us know if you have questions! 13 Iowa School Finance Information Services 1201 63 rd Street Des Moines, IA 50311 Office: 515-251-5970 www.isfis.net Larry Sigel, ISFIS – Partner Cell: 515-490-9951 Office: 515-251-5970 larry.sigel@isfis.net