Last month I discussed the timing of specific pension related dates in valuing, measuring and reporting your pension related amounts for the full accrual basis statements in accordance with GASB Statement 68. This month I am discussing the employer contributions to the plan, and how they should be reported for the full accrual based statements.
As you may remember from last month, the pension liability (or asset if your plan is fully funded) reported is most likely going to be measured as of a date earlier than that of the reporting date. GASB 68 calls that the “measurement date”. Because your pension liability (asset) is measured as of a different date than your fiscal year-end date, you will have some timing issues with the employer contributions made between the measurement date and the fiscal year-end date being reported. In the past, those contributions probably were a credit to cash, and a debit to pension expense. However, because those contributions are part of the plan’s fiduciary net position, and because the plan’s fiduciary net position is part of the calculation to get to your plan’s Net Pension Liability (Asset) being recorded, those contributions should really be recognized as a reduction to the overall Net Pension Liability in the year they were paid to the plan. Therefore, we will now be crediting cash and debiting a deferred outflow for employer contributions to pensions for the employer’s contribution made between the measurement date and the fiscal year end being reported. In the subsequent year, you will credit the deferred outflow for contributions you posted in the prior year and debit the Net Pension Liability (Asset) because last year’s contributions were applicable to this year’s Net Pension Liability (Asset) that was measured last year. Confused? It gets better! In some cases there will be some variation to the amounts you post above if the measurement date is not one year behind the fiscal year end date. For example, if your plan has a June 30 year-end, but the employer government has a December 31 year-end, you will only defer six months’ worth of employer contributions because there are only six months between the measurement date of the plan on June 30 and the employer’s fiscal year-end on December 31, and the contributions made in the last six months of the employers fiscal year-end were not applicable to the Net Pension Liability (Asset) measured on June 30.
Still confused? I imagine some may be, and if that is the case, or you want to learn more about the plethora of changes effecting your upcoming statements as a result of GASB Statement 68, I encourage you to attend our free live learning session here at our office in Tempe, AZ on April 29, 2015 from 8:00am – 10:30am. Can’t make it to the live event? Sign up for our live webinar at the same time and listen in from the comfort or your office or home. To be included on the invite, please contact Chelsea Kreger at email@example.com. The deadline to RSVP is April 28, 2015. I hope to see, or hear, you there.
By Brian Hemmerle, CPA, CFE