The Government Accounting Standards Board (GASB) standards on pensions substantially change the accounting and financial reporting of public employee pension plans and the state and local governments that participate in such plans. GASB Statement No. 67, Financial Reporting for Pension Plans, revises existing guidance for the financial reports of most governmental pension plans. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, revises and establishes new financial reporting requirements for most governments that provide their employees with pension benefits.
The accounting and auditing issues facing employers that participate in plans as well as the plans themselves are complex. The AICPA Audit and Accounting Guide, State and Local Governments (SLG Guide) includes a comprehensive chapter that addresses the accounting and financial reporting requirements under the GASB's new pension standards as well as related auditing considerations for both audits of governmental pension plans and the employers that participate in those plans. The SLG Guide also includes, as appendixes, the multiple-employer whitepapers previously issued through the GAQC. The original whitepapers that address issues and suggested best practice solutions related to cost-sharing multiple-employer plans (cost-sharing plan) and agent multiple-employer plans (agent plans) and the related auditing interpretations are discussed in the following sections.
|All Pension Plans (Single, Cost-Sharing, and Agent)
The AICPA State and Local Government Expert Panel, working with the AICPA Audit and Attest Standards Team, clarifies that it is not appropriate for the auditor of the employer to make reference to the plan auditor's report for purposes of pension amounts.
|New Guidance Available
- 2015 edition of the AICPA Audit and Accounting Guide, State and Local Governments. A critical addition to this year’s guide is a new chapter, Defined Benefit Pension Plans (Plan & Employer Considerations), that addresses the accounting and financial reporting requirements under GASB’s new pension standards, as well as related auditing considerations for both governmental pension plans and the employers that participate in those plans.
- Part 1: Accounting and Auditing Considerations for Audits of Pension Plans addresses considerations relating to GASB Statement No. 67, Financial Reporting for Pension Plans—an amendment of GASB Statement No. 25. It also discusses the various types of plans and addresses the relevance of census data, including examination report illustrations for situations where census data is tested by the employer’s auditor.
- Part 2: Employer Accounting, Financial Reporting, and Auditing Considerations: Single & Agent Employers addresses specific accounting and auditing considerations for employers participating in single-employer and agent multiple-employer defined benefit pension plans in accordance with GASB Statement No. 68.
- Part 3: Employer Accounting, Financial Reporting, and Auditing Considerations: Cost-Sharing Employers contains similar information to that in Part 2 but in the context of participating employers in cost-sharing multiple-employer defined benefit plans.
- Appendixes include two of the previously issued whitepapers related to agent and cost-sharing multiple-employer plans which provide nonauthoritative solutions to various evidence issues for multiple-employer plans, participating employers, and their auditors.
- NEW SLGEP: Emerging Pension Issues Article. The AICPA's State and Local Government Expert Panel has summarized significant issues related to GASB Statement No. 68, Accounting and Financial Reporting for Pensions in a nonauthoritative article.
|Cost-Sharing (and Single-Employer) Pension Plans
With the implementation of GASB Statement No. 68 employers will be required to recognize a liability as employees earn their pension benefits (that is, as they provide services to the government). For the first time, employers participating in cost-sharing plans will recognize their proportionate share of the collective pension amounts for all benefits provided through the plan. The AICPA's State and Local Governments Expert Panel (SLGEP) has addressed numerous issues through the following whitepapers and auditing interpretations. This guidance is also included in the SLG Guide.
With the implementation of GASB Statement No. 68, employers will be required to recognize a liability as employees earn their pension benefits (that is, as they provide services to the government). For the first time, employers participating in agent plans will recognize their specific pension amounts which include net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense. The SLGEP has addressed numerous issues through the following whitepaper and auditing interpretations which is also included in the SLG Guide.
- GASB pension changes: Are you ready?, Journal of Accountancy, January 1, 2015
- Key auditor considerations for GASB pension standards’ rollout, Journal of Accountancy, January 1, 2015
- GAQC Alert #255, describes AICPA governmental pension-related Auditing Interpretations for agent plans), June 26, 2014
- GAQC Alert #253, describes agent whitepaper, May 29, 2014
- GAQC Alert #249, describes pension-related auditing interpretations, April 22, 2014
- GAQC Alert #244, describes the cost-sharing whitepapers and related SLGEP efforts on pension-related matters, February 27, 2014
- Plans bear responsibilities in multiple-employer pension reporting, Journal of Accountancy, February 26, 2014
- GASB’s five things to watch in pension standards implementation, Journal of Accountancy, November 11, 2013
|Additional Resources on Pensions
The following are resources available to both auditors of governmental pension plans or participating governments:
- 2015 edition of the AICPA Audit and Accounting Guide, State and Local Governments will include a comprehensive new chapter addressing accounting and auditing considerations of plans and employers.
- GASB Pronouncements. The GASB has made available the following pronouncements on its website: Statements of Governmental Accounting Standards (including GASB Statement Nos. 67 and 68); Concepts Statements; GASB Interpretations; and GASB Technical Bulletins
- GASB Educational Resources. The GASB has made available numerous resources on its website that include podcasts, fact sheets, articles, and more which are all available to the public.
- GAQC Archived Web Events on Pensions (available now to GAQC members). The GAQC has offered numerous Web events on the GASB pension standards. GAQC members can access the following archived events:
- GASB Pensions: Are You Ready for June 30, 2015 Audit Implementation?
- An Overview of the New GASB Pension Accounting Standards
- The GASB Pension Standards Part I: Considerations for Cost-Sharing Plans, Participating Employers, and Their Auditors
- The GASB Pensions Standards Part II: Considerations for Agent Plans, Participating Employers and Their Auditors
- Self-Study Course/On-Demand Course, GASB Statement No. 68 Audit and Accounting Workshop.
- AICPA Governmental Conferences. Anticipating the significant effect the new GASB pension standards will have on plans, employers, and their auditors, the AICPA will provide extensive coverage of these matters in the 2014 governmental conference agendas. Consider attending: