FY2015 GASB 68 information: FINAL report and FAQs
Below are links to the updated cover memo and FINAL FY2015 GASB 68 report and pension allocation schedules for the Massachusetts Teachers' Retirement System (MTRS), as required under Governmental Accounting Standards Board (GASB) Statement No. 68. Please note that the final report, dated September 25, 2015, includes attestations from KPMG, the Commonwealth's independent auditor, and minor text edits; the numbers, amounts and internal references to schedules and page numbers did not change from the draft report dated September 21, 2015.
If you have any questions, please contact Michael Rodino of the State Comptroller's office (email@example.com), or Sean Neilon, Assistant Executive Director of the MTRS (firstname.lastname@example.org).
We have worked with the State Comptroller's office on the questions and responses below, and reiterate that entities should consult with their auditors as to how the standard should be applied to their own financial statements.
Question 1: The GASB 68 report is as of June 30, 2014 and my district is finalizing our FY15 financial reports. Am I to use the June 30, 2014 information in my FY15 report?
Response 1: Due to the time required to implement GASB Statement No. 68, GASB has allowed financial statement preparers to select a measurement date that is no earlier than "the end of its prior fiscal year." The Commonwealth selected June 30, 2014 as the measurement date. All participants in the MTRS will report their collective share of the pension expense as of the measurement date in the June 30, 2015 financial statements. Please refer to question 123 of the GASB 68 implementation guide:
123. Q—If a cost-sharing employer's fiscal year-end is the same as the fiscal year-end of the pension plan through which it provides benefits, can the employer report its proportionate share of the collective net pension liability as of a measurement date that is one year earlier than the "as of" date of the (collective) net pension liability reported by the plan at the same fiscal year-end?
A—Yes. To avoid a circumstance in which employer financial reports potentially would be delayed awaiting information that also is included in the pension plan's financial report, Statement 68 permits the measurement date of the collective net pension liability used by a cost-sharing employer to determine its reported pension liability to be as of a date no earlier than the end of its prior fiscal year, provided that the actuarial valuation used to determine the collective net pension liability meets the timing requirements of paragraph 60 of Statement 68 and that the measure meets the requirement of paragraph 61 of Statement 68 that the plan and the employers use the same assumptions when measuring similar or related information. (See Questions 152−154.) Cost sharing pension plans are required by Statement 67 to report information about the (collective) net pension liability as of the plan's fiscal year-end. Therefore, for example, in financial statements as of June 30, 20X5, a cost-sharing pension plan is required to report a (collective) net pension liability measured as of June 30, 20X5, whereas a cost-sharing employer that provides benefits through the plan can report a proportionate share of the collective net pension liability with a measurement date of June 30, 20X4, if the requirements of paragraphs 60 and 61 of Statement 68 are met.
The plan itself, MTRS, must report in the Commonwealth's CAFR a liability in as of June 30, 2015 under the requirements of GASB Statement No. 67.
Question 2: We noted that the draft report is dated as of and for the year ended June 30, 2014. Can you please confirm that the intention of MTRS is to not adopt GASB 68 retrospectively and that the June 30, 2014 figures presented in the draft report will be the measurement date for audits as of and for the year ended June 30, 2015?
Response 2: June 30, 2014 has been selected as the measurement date as allowed by GASB in the year of implementation.
Question 3: We would like to confirm the amounts that the Schools should be including as in-kind revenues and expenses in their financial statements. Our understanding from GASB 68 is that, under the special funding situation the employer (the School) should recognize their proportionate share of the collective pension expense. After reading the draft report, we are not certain whether the Schools should be recording the amount in the 'Supplemental Schedule of Special Funding Amounts by Employer' (Employer Pension Expense and Revenue for Commonwealth Support column) or their amount in the 'Supplemental Schedule of Employer Allocations of Special Funding Amounts' (Commonwealth Pension Support Provided column), or the combined amount from both of these supplemental schedules. Can you please confirm whether the Schools should record the combined total of the figures in both of these supplemental schedules or the amount from one of them?
Response 3: The amounts that the entities will record in their financial statements are on the Supplemental Schedule of Special Funding Amounts by Employer in the column titled "Employer Pension Expense and Revenue for Commonwealth Support." Also, the entities will have to make footnote disclosures of the amounts reported on the Supplemental Schedule of Special Funding Amounts by Employer in the "Commonwealth's Proportionate Share of the Net Pension Liability Associated with the District" column. For further information we refer you to question number 224 of the GASB 68 Implementation Guide related to special funding situations.
Question 4: Why are this year’s on behalf payments lower than last year?
Response 4: In previous years, the on behalf payments were reported under GASB 24 and those payments were the "pay as you go" numbers for the pension portion of the retiree benefits paid to your district's retired educators in the fiscal year. Last year, the total GASB 24 payments were $2,020,477,093. This year, under the GASB 68 standard, the on behalf payments are allocated as a percentage of the Commonwealth's 2014 Pension Expense for MTRS (approximately $1,104,396,000). District allocations are based on the ratio of each employer's covered payroll to the total covered payroll.
Again, we strongly urge your auditors to review the standard to determine the correct accounting treatment.