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The New Pension StandardsGASB Statements 67,68 & 71Florida Court Clerks & ComptrollersFebruary 6, 2015Mark White CPA, Audit PartnerPurvis Gray & Company LLP1

Mark .We Really Love Pension CPE!2

Two New Statements Issued June 2012No. 67PlanReportingNo. 68EmployerAmendsNo. 25EffectiveFYE 2014ReportingAmendsNo. 27EffectiveFYE 20153

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The GASB’s Deliberative t 2011FinalStatementsIssued2012Invitation ToComment2009PreliminaryViews20105

Summary of No. 67 – Plan ReportingVery Few FSRecognition ChangesFrom No. 25Clarified That DropLiability NotRecorded DuringBuildupApplies to Pension PlanFS Issued Separately oras P/T/F of LocalGovernmentChange InPensionLiabilityMostlyNotes andRSI ChangesAnnual Rateof Return onPlan AssetsAggregateEmployerInformation6

The No. 68 Big PictureUnfunded DefinedBenefit PensionLiabilityFormerlyDisclosed In FRSNotes & RSIWill Now BeBooked inMembersSONPof EconomicResources FS7

No. 71 Contributions Made After MDMD Must Be Within One Year of RDContributions Made - DeferredOutflowMeasurementDate (MD)6/30/15ReportingDate (RD)9/30/15Employer FYE8

Who is included?No. 68 Applies Equally To;SingleEmployer(Local MuniPlans )MultiMultiEmployerEmployerAgent Plans Cost Sharing(FLC)Plans (FRS)9

FRS MembersMemberAMemberC, D Member BEach Member Will Record Their Pro-rataShare Of the Overall FRS Net PensionLiability10

Implementation Applied Retroactively, Restate Opening Net Positionand New Pension Liability at BOY (PPA Like) Applied Retroactively, Restate Opening DeferredOutflows Including Contributions made After MD This is Unlike No. 45 OPEB Implementation Which isBeing Re-examined and May Soon Change11

Up Until NowAccountingSameFunding12

Up Until Now Employer accounting and actuarialfunding/contributions have been ONEOld GASB Statement No. 27 (current)–––The employer’s obligation is to fund the planAccounting expense (ARC) -an actuarial funding contributionMemberAlmost Cash Basis, Very Little BSeffectEmployerFunding ObligationPlan13

From Now On Employer accounting and funding Have Been Separated! “We do accounting; actuaries do funding.” – BobAttmore, GASB ChairmanAccounting(Apples)Funding(Oranges)14

From Now On New GASB Statement No. 68 Looks At It This Way;–––The employer’s obligation is “ultimately to the members”The Accounting Expense More Accrual Based (Earned) NoLonger Based on Actuarial Funding ContributionThe BS Liability Old Unfunded AccruedActuarial LiabilityMemberEmployerPlan15

FRS - Two Actuarial Reports Now NeededActuarial ReportFor AccountingActuarial ReportFor FundingWill Allocate NPL InAccounting Report ByMember16

Play on Words I kept wondering why the baseball kept gettingbigger and bigger then it hit me. I know a guy who is addicted to brake fluid he says he can stop anytime. They told me I had “Type A” blood, but it wasreally .a Type-O. .17

The New Pension Liability EquationTPL Total Pension Liability, MinusPNP Plan Net Position, EqualsNPL Net Pension Liability18

Terminology-Definitions– Total Pension Liability (TPL) – the portion of the actuarial present value ofprojected benefit payments that is attributable to past periods of employeeservice in conformity with the requirements of Statement 68.– Plan Net Position (PNP) - Fair Value of Plan Assets less plan liabilities - FMVas of the measurement date (no longer smoothed).– Net Pension Liability (NPL) – difference between the TPL and the PNP– Projected Benefit Payments – All benefits estimated to be payable throughpension plan to current active and inactive employees as a result of theirpast service and their expected future service.– Measurement Date - (No. 68 only) TPL and NPL measured as of the samedate not more than 12 months before the reporting date.19

TPL Illustrated20

GASB Liability DefinitionGASB ConceptsStatement No. 4Liabilities are present obligations to sacrificeresources that the government has little orno discretion to avoid.21

Calculating The Net Pension LiabilityDiscount Rate LTEROR For Plan AssetsPlan Net Position No Asset SmoothingTPL Calculated Using Traditional EntryAge Normal Actuarial Cost Method22

Change In Net Pension LiabilityPension ExpenseChangein PlanNetPositionChangein TotalPensionLiabilityDeferred InflowsOutflows23

Immediate vs. Gradual RecognitionChange inTPLChange inPNPRecognize SomeParts ImmediatelyRecognize SomeParts ImmediatelyRecognize SomeParts GraduallyRecognize SomeParts GraduallyDeferredOutflows/InDeferredOutflows/In24

Changes in TPL Expensed ImmediatelyAnnualServiceCostIntereston ges25

Changes in TPL Expensed lGains andLosses26

Changes in PNPGradual RecognitionFor Difference InProjected Vs. ActualInvestment ingsRecognizedImmediatelyBenefits PaidAdministrativeExpenses27

Deferred Inflows and OutflowsConceptStatement No.4GASB 68–EmployerPensionReportingGASB 65 –ItemsPreviouslyRecognizedGASB 53DerivativesDeferredInflows andDeferredOutflowsGASB 60 -SCAGASB 63FinancialReporting28

Play on Words I tried to catch some fog the other day but I mist. I’m reading a book about anti-gravity, I can’t put it down. I couldn’t remember how to throw aboomerang .but eventually it came back to me.29

Calculation of Pension ExpenseBalances at 12/31/X8Changes for the year:Service costInterestChanges of benefit termsDifferences between expected and actualexperienceChanges of �employeesNet investment incomeBenefit payments, including refundsAdministrative expenseOtherExpense for beginning deferred amountsNet changesBalances at 12/31/X9Total PensionLiability(a)Plan FiduciaryNet Position(b)Net PensionLiability(a) – (b) ,54451,119199,273(126,863)(3,427)8(126,863) 2,283,333136,3353,182,228 229,6542,512,987 (93,319)669,241DeferredOutflows ofResources 289,881DeferredInflows ofResources PensionExpense30,107 101,695231,141-(16,804)(60,320)(77,124) 212,757 973,427(8)56,728 153,33930

No. 68 Timing IssuesReportingDate (RD) BS DateMeasurementDate (MD) Within 1 Yearof RD31

No. 68 Timing Issues – School BoardRestate ForBeginning BalAdjust To EndingBalOne Year6/30/13 BegBal. Date6/30/14MD6/30/15RDEmployer and FRS FYE Are The Same32

No. 68 Timing Issues – CountyAdjust to EndingBalRestate ForBeginning BalThree Months6/30/14FRS Beg NPL9/30/14Not AvailableFRS FYE6/30/15FRS NPL9/30/15RDEmployer FYE33

No. 71 Contributions Made After MDThree MonthsContributionsMade - DeferredOutflow6/30/14Beg Bal.Date6/30/15MDEmployer FYE9/30/15RDMeasurementDate34

Timing IssuesI don’t know about you but I’m getting a headache!35

What about FYE 2014?FRSMembersNo Change From PY, Same NoteDisclosures, Because No. 67 Appliesto Plan Reporting Only (FRS MustImplement It, Not You!)36

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No. 68 Note Disclosures Cost SharingPlansPlan Description AssumptionsName, Type, Terms, AdminAll NPL Assumptions,Classes Covered, Benefits, AuthorityLTEROR Overall and by Investment Class# participants, contributionsDiscount Rate, NPL 1%, -1% Disc. % Change38

No. 68 Note Disclosures Cost SharingPlansPlan FSOther InfoHow to Get a Copy of the FRS FSMD of NPL, Changes from MD to RDSignificant Changes in Plan FSMakeup of Deferred Inflow/OutflowsOther Relevant Plan FS Information5 year Expected Changes in DI/ DO39

No. 68 RSI Cost Sharing Plans10 Yr. NPL & Change in NPL 10 Yr. Schedules ofEmployer’s proportion % and amount ofNPL, DI & DOActuarial Contributions, Required & ActualEmployers Covered PayrollDifference in AboveNPL as % of Covered Payroll, Plan NetPosition as % of TPLActual Contributions as % of Covered PR40

Issues With Cost Sharing Plans - FRSNeed Total FRS NPL Allocated To;Member AMember CMember DMember BMember E41

Issues With Cost Sharing Plans FRSTWO EE AUDITINTERPRETATIONSPRESCRIBINGSOLUTIONSTESTING CENSUSDATA & INFO FORER REPORTINGPLAN AUDITORTO ISSUEREPORT ONINFO BY PLANPARTICIPANTAND TESTCENSUS DATA42

AICPA Audit InterpretationsAudited CSPlan FSUnauditedParticipantDataNotSufficientER AuditEvidenceWHY?43

AICPA Audit InterpretationsMateriality Level?Audited CSPlan FSAuditedParticipantDataSufficientER AuditEvidenceHowever ER auditor has responsibility to recalculate the numerator of thepercentage used in the allocation process by the plan.44

Play on Words The dead batteries were given away free of charge. I was going to look for my lost watch but.I could never find the time. A popular new broom just came out, it’s .really sweeping the nation.45

High-Level ImplicationsHigherProfile inCAFRLiabilityFrom Notesto BSNetPositionMay GoNegativeMore Fuel to Pension Rollback Movement46

High-Level ImplicationsMore Volatile FSas PensionLiability BouncesWith MarketFluctuations47

High-Level xecutiveStaff andElectedOfficials48

High-Level ImplicationsLocalGovernmentsRush ToImplementNew Std.Start Talking WithYour Auditors & FRSNow49

Play on Words I was struggling to figure out how lightningworks .then it struck me. I used to be addicted to soap, but .I’m clean now. A hole was found in the nudist colony’s wall, thepolice are .looking into it.50

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The New Pension StandardsGASB Statements 67,68 & 71Florida Court Clerks & ComptrollersFebruary 6. 2015Mark White CPA, Audit PartnerPurvis Gray & Company LLP52

Net investment income 199,273 (199,273) (16,804) - (182,469) Benefit payments, including refunds (126,863) (126,863) - . How to Get a Copy of the FRS FS Significant Changes in Plan FS Other Relevant Plan FS Information Other Info MD of NPL, Changes from MD to RD Makeup of Deferred Inflow/Outflows