New Pension Standards GASB 67 68 and the

New Pension Standards GASB 67 & 68 and the Impact on District Financial Statements Presenters: Elton Bienvenue, Asst. Business Manager Biloxi Public Schools Samantha Sandifer, Director of Finance Poplarville School District 1

GASB Statement No. 67: Financial Reporting for Pension Plans □ □ □ Effective for plan fiscal years beginning after June 15, 2013. PERS implemented for fiscal year ending June 30, 2014 http: //www. pers. ms. gov/Content/CAFR 2014. pdf 2

GASB Statement No. 68: Accounting and Financial Reporting for Pensions □ □ □ Effective for employer fiscal years beginning after June 15, 2014. School Districts to be implemented for fiscal year ending June 30, 2015 Must apply GASB Statement No. 71: Pension Transition for Contributions Made Subsequent to the Measurement Date (clarifies Statement No. 68) 3

GASB Statement No. 67 & 68 Pronouncements and Implementation Guides □ □ www. gasb. org Standards & Guidance Pronouncements Implementation Guides 4

Background □ □ □ GASB issued these two new standards in June 2012 pertaining to the accounting and financial reporting requirements for public pensions. The new standards generally apply to defined benefit pension plans (PERS) The intent of the standards is: -Enhance pension-related information in financial reports by providing greater transparency -Standardize the valuation practices from entity to entity 5

Impact to Public Schools □ □ □ Recognize a Net Pension Liability (NPL) on the Statement of Net Position for their proportionate share related to the underfunding of PERS Recognize an additional liability as employees earn pension benefits Implement significant changes to the current pension footnote disclosures and required supplementary information Employer contribution requirements are not affected by the new standards and are for reporting only Effective for FYE June 30, 2015 financial statements 6

Scope & Applicability □ □ □ Contributions from employers and earnings on contributions are irrevocable Plan assets are dedicated to providing pensions to plan members only Plan assets are legally protected from the creditors of employers, plan administrator, and creditors of the plan members 7

Type of Defined Benefit Pension Plan specifically pertaining to PERS □ □ Cost-sharing multiple-employer defined benefits pension plan (cost-sharing pension plan) Pension obligations to the employees of more than one employer are pooled and pension plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan 8

PERS NPL Calculation Less Equals Total Pension Liability (TPL) Fiduciary Net Position (FNP) Net Pension Liability (NPL) PERS 2014 CAFR TPL $37, 015, 288, 000 FNP (24, 877, 119, 000) NPL $12, 138, 169, 000 9

Example School District’s 2014 Proportionate Share of NPL School District’s Employer Contributions Divide by Total PERS Employer Contributions Equals Proportionate Share Multiply by PERS NPL Equals District’s NPL $ 1, 597, 815 $ 969, 674, 000 0. 16477858% 12, 138, 169, 000 20, 001, 106 $ $ 10

Example School District’s 2014 Unrestricted Net Position District’s Unrestricted Net Position before NPL $ 4, 631, 645 Less District’s share of NPL (20, 001, 106) Equals District’s Unrestricted Net Position after NPL $ (15, 369, 461) 11

Example School District’s 2014 Total Net Position District’s Total Net Position before NPL $ Less District’s share of NPL Equals District’s Total Net Position after NPL $ 24, 271, 322 (20, 001, 106) 4, 270, 216 12

Deferred Outflows/Inflows of Resources □ □ Differences between expected and actual experience in the measurement of the total pension liability Net difference between projected and actual investment earnings Changes of assumptions Changes in employer’s proportion and differences between employer’s contributions and proportionate share of employer’s contributions 13

Deferred Outflows/Inflows of Resources cont. □ □ Changes in employer’s proportion and differences between employer’s contributions and employer’s schedule of allocated contributions Employer’s contributions to the pension system subsequent to the measurement date of the net pension liability 14

Pension Expense and Deferred Outflows/Inflows of Resources □ □ □ Pension expense for the current year including the portion of the change in NPL due to investment gains/losses, assumption gains/losses and/or experience gains/losses Allocate remaining portion of the changes in the NPL not recognized immediately PERS will be providing schedules to include the majority of the required data 15

District Note Disclosures Plan Description: □ • • • Name Type of plan Board composition Members/employers Covered classes Statutory authority Benefits Contribution requirements Discount rate 16

District Note Disclosures cont. □ Plan Investments: • • • □ Authority over the investment policy Asset allocation requirements Money weighted rate of return Net Pension Liability Components: • Total pension liability less fiduciary net position 17

District Note Disclosures cont. □ Significant Assumptions and Other Inputs: • • • Discount rate Long-term expected rate of return overall and by major asset class Sensitivity measures of the PL when applying a discount rate 1% higher and lower than required 18

Required Supplementary Information (RSI) □ 10 -year NPL schedule: • • • Percentage of the collective NPL Amount of the collective NPL Covered employee payroll Amount of collective NPL as a percentage of covered employee payroll Plan’s fiduciary net position as a percentage of TPL 19

Required Supplementary Information (RSI) cont. □ 10 -year actuarial required contributions schedule: • • • Required employer contributions Actual employer contributions Amount of difference between required and actual contributions Covered employee payroll Amount of contributions in relation to required employer contributions as a percentage of covered employee payroll 20

GASB Proportionate Share Cost-Sharing System Example Employer City of Clayborne Contributions Proportionate Share $1, 227, 329, 600 32. 9051% Cedar Medical Center 446, 524, 900 11. 9715% City of Smithville 408, 734, 200 10. 9583% Johnson County 376, 868, 300 10. 1039% City of Woodville 251, 127, 000 6. 7328% State University 234, 263, 200 6. 2807% Lincoln County Schools 226, 256, 200 6. 0660% Estes Public Schools 208, 201, 900 5. 5819% Washington County 199, 048, 800 5. 3365% Best Community College 151, 557, 800 4. 0633% Total Plan $3, 729, 911, 900 21

Example Schedule of Collective Pension Amounts 22

Employer Developed Schedules 23

Employer Developed Schedules Deferred Outflows 24

Employer Developed Schedules Deferred Inflows 25

Employer Developed Schedules – Pension Expense 26

Summary □ □ NPL will have significant impact on District Net Position District will have to prepare additional footnote disclosures and RSI PERS (Gregory, CPA, Deputy Administrator) will provide actuarial data that will be used to prepare the schedules/disclosures MDE (Donna Nester, Bureau Manager) is aware of impacts and will be ready to assist Districts 27