GASB 68 Webinar

for IMRF Employers
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GASB 68 Webinar Presentation
View the August 24, 2017, program presented by IMRF Executive Director Louis Kosiba and Chief Financial Officer Mark Nannini.

GASB 68 Webinar Resources

On Thursday, August 25, IMRF presented a new webinar program, "What GASB 68 Means For You." Louis W. Kosiba, Executive Director, and Mark Nannini, Chief Financial Officer, provided a general overview of GASB 68 reporting and reviewed technical aspects and documentation employers receive for accurate reporting. Attendees were invited to submit questions, which were addressed at the conclusion of the program.

This recap of "What GASB 68 Means For You" includes a link to view the webinar program in its entirety and a link to download the presentation's slides. The following transcript summarizes the submitted questions and answers.

Questions and Answers

Q.:  How is the reporting and disclosure different for financial statements presented on the cash basis of accounting?

A.: Auditors should consult with individual clients to determine reporting for the financial statements on the cash basis of accounting in regards to GASB 68. The GASB 68 white papers from the AICPA should be used for instruction and guidance in this process.

Q.: Can you provide the explanation again regarding the difference between GASB 50 and GASB 68 with respect to “Employer’s Funded Status?”

A.: Prior to GASB 68, accounting and financial reporting standards were closely associated with the approach that many pension plans took to funding their benefits—that is, toward contributing sufficient resources (the Actuarial Required Contribution or ARC) to a defined benefit pension plan to finance benefit payments. Consequently, many pension plans established funding policies based on the GASB’s standards. However, after re-examining the prior standards for pensions, the GASB concluded that approaches to funding are not necessarily the best approach to accounting for and reporting pension benefits. GASB 68 separates the funding of pensions from the accounting of pensions. While the term “Funded Status” is used in both statements, their meaning is distinctly different.

In GASB 50, funded status is calculated by dividing actuarial assets by the aggregate actuarial liability. Actuarial assets are calculated by our actuary using a 5 year smoothing of investment gains and losses. This is done to eliminate volatility in the rate making process. For an employer, pension expense equaled total employer contributions.

In GASB 68, funded status is calculated by dividing the Fiduciary Net Position by the Total Pension Liability. Fiduciary Net Position is calculated on a market basis, therefore there is no smoothing of investment gains and losses. This will cause large fluctuations year to year in the funded status. This is an expected outcome. Under GASB 68, pension expense is calculated as the change in the Net Pension Liability, plus employer contributions for the year, less the change in outstanding balances of deferred inflows and outflows of resources for the year.

An additional difference between the two amounts is that the GASB 68 Funded Status includes amounts for actives, inactives, and retirees in the calculation while the GASB 50 Funded Status only uses amounts for actives and inactives. Amounts for retires are not included as they are always 100% funded. Therefore, in most cases, the funded status under GASB 68 will be higher than under GASB 50.

Limitations of the GASB 68 Funded Status: The funding projections used in the GASB 68 report are strictly for determining the single discount rate and are different than the funding projections used in the GASB 50 report to calculate the actuarial required contributions. The GASB 68 Funded Status measurement is inappropriate for assessing the sufficiency of plan assets to cover the estimated cost of settling the plan’s benefit obligations.

For additional information please refer to the entire GASB 68 report located in Employer Access.

Q.:  When are the GASB 68 reports generated by IMRF? Our measurement date would ideally be June 30, 2017 (as an example) – not December 31, 2017.

A.: GASB 68 reports are generated by IMRF and distributed to employers during the month of April. IMRF’s measurement date for GASB 68 reporting is December 31; please refer to pages 2 and 4 of the Executive Summary in your 2017 GASB 68 report for IMRF’s measurement date.

Q.:  When is the GASB 50 report issued for each district?

A.: The GASB 50 report is issued at the end of March or the beginning of April every year. In 2017 the reports were issued on 4/1/2017.

Q.:  Will a participant company be notified when the GASB 68 are available on the website?

A.:IMRF notifies the employers through an email alert that is distributed to the Authorized Agent, Security Administrator, and Web Assistants when the GASB 68 reports are available on the website. In 2017 the GASB 68 reports were available on 4/27/2017.