Proposed changes to General Accounting Standards Board (GASB) Statements will limit the way the Texas Municipal Retirement System (TMRS) and cities calculate pension liability, likely leading to large liabilities in city financial statements. (GASB is the independent, not-for-profit organization that establishes financial accounting and reporting standards for states and cities.)

The standards affect the way pension liabilities through the Texas Municipal Retirement System and other public retirement options are calculated. GASB proposes to reexamine its current pension guidance to change the calculation to: (1) use an entry age based actuarial method; (2) use an amortization period based on remaining years of service; and (3) immediately recognize any gains or losses in the accounts or benefit enhancements. The proposed method of calculation could lead to volatility in determining a city’s pension liability because of the way pension liability is currently calculated for budgetary purposes.

GASB has already issued preliminary views on these changes and has had hearings around the country on the issue. In September 2010, TMRS and the Government Finance Officers Association of Texas both commented on the proposed changes. Drafts of the statement changes are expected in 2011, with final statements in 2012 and implementation of any changes in 2014 or 2015. For more information on the current status of these proposed changes, please click here.

TML member cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

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