MUNICIPAL PENSION REPORTING GUIDELINES PROPOSED CHANGES
Last month, the Government Accounting Standards Board (GASB) released two draft guidelines that would change how cities report on the assets and liabilities of their pension plans. The drafts – Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans – propose amendments to existing standards as part of an effort to improve how the costs and obligations associated with state and local pensions are calculated and reported.
The new guidelines would require state and local governments to report their net pension liability on their financial statements and would make changes in the way cities calculate their total pension liability and pension expenses. For example, the guidelines require cities to use the new discount rate that is based on the expected long-term rate of return for the pension fund and the interest rate on a 30-year AA or higher rated municipal bond index, rather than the traditional rate of return discount rate. They would also require cities to use a single actuarial cost allocation method that is based on the starting date of the employee and to count pension expenses as an immediate liability rather than one that is deferred and amortized over 30 years.
The draft guidelines are available at:
GASB is accepting comments through September 30, 2011, and the League will file comments on behalf of its member cities. Cities that are concerned are encouraged to file comments as well.