Note X – Pensions - Defined Benefit Plans – No Qualifying Trust
A template for this note is not available. See “Instructions to preparer:” for various disclosures that may be required.
Instructions to preparer:
The instructions below assume the plan is not administered through a qualifying trust. See Governmental Accounting Standard Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards (Cod.) Section (Sec.) P22 “Pension Activities – Reporting for Benefits Not Provided through Trusts That Meet Specified Criteria – Defined Benefit.”
If applicable, the notes should separately identify amounts for the primary government (including blended component units) from amounts for discretely presented component units.
Aggregate Pension Amounts
There should be one table that reports the aggregate amounts for all plans, regardless of the type of pension plan (whether provided through single employer, agent, or cost-sharing pension plans).
Example:
The following table represents the aggregate pension amounts for all plans for the year 20XX:
|
Aggregate Pension Amounts – All Plans |
|
|
Pension liabilities |
$ |
|
Pension assets |
$ |
|
Deferred outflows of resources |
$ |
|
Deferred inflows of resources |
$ |
|
Pension expense/expenditures |
$ |
The information identified in the following paragraphs should be disclosed for benefits provided through each single-employer pension plan in which the employer participates. Disclosures related to more than one pension plan should be combined in a manner that avoids unnecessary duplication.
Pension Plan Description
a. The name of the pension plan, identification of the public employee retirement system or other entity that administers the pension plan, and identification of the pension plan as a single-employer pension plan.
b. A brief description of the benefit terms, including (1) the classes of employees covered; (2) the types of benefits; (3) the key elements of the pension formulas; (4) the terms or policies, if any, with respect to automatic postemployment benefit changes, including automatic COLAs, and ad hoc postemployment benefit changes, including ad hoc COLAs; and (5) the authority under which benefit terms are established or may be amended. If the pension plan is closed to new entrants, that fact should be disclosed.
c. The number of employees covered by the benefit terms, separately identifying numbers of the following:
(1) Inactive employees (or their beneficiaries) currently receiving benefits
(2) Inactive employees entitled to but not yet receiving benefits
(3) Active employees.
d. The fact that there are no assets accumulated in a qualifying trust. Each of the 3 qualifying criterion that the plan does not meet should be disclosed.
Example:
The plan is funded on a pay-as-you-go basis and there are no assets accumulated in a qualifying trust.
Or
The plan is administered through a trust that does not meet the requirements of a qualifying trust. (Then describe each criterion that the trust does not meet).
e. Identification of the authority under which requirements for the employer to pay pensions as the benefits come due are established or may be amended. Also, the amount paid by the employer for pensions as the benefits came due during the reporting period, if not otherwise disclosed.
Note to Preparer:
Firefighters’ Pension Fund (RCW 41.16.050) – The state contributes 25% of taxes on fire insurance premiums to these plans and is considered a non-employer contributing entity. The amount of these contributions received (BARS account 3360691) should be disclosed. This is not considered a special funding situation.
Assumptions and Other Inputs
Significant assumptions and other inputs used to measure the total pension liability, including assumptions about inflation, salary changes, and ad hoc postemployment benefit changes (including ad hoc COLAs) should be disclosed. With regard to mortality assumptions, the source of the assumptions (for example, the published tables on which the assumption is based or that the assumptions are based on a study of the experience of the covered group) should be disclosed. The dates of experience studies on which significant assumptions are based also should be disclosed. If different rates are assumed for different periods, information should be disclosed about what rates are applied to the different periods of the measurement.
With regard to the discount rate, the rate applied in the measurement and the source of that rate should be disclosed. Measures of the total pension liability calculated using (1) a discount rate that is 1-percentage-point higher than the current discount rate and (2) a discount rate that is 1-percentage-point lower than the current discount rate.
Example:
|
1% (3%) |
Current Disc. Rate (4%) |
1% Increase (5%) |
|
|
Total Pension Liability |
825,000 |
750,000 |
660,000 |
Changes in the Total Pension Liability
For the current reporting period, a schedule of changes in the total pension liability should be presented. The schedule should separately include the information in the table below.
Example:
Changes in the Total Pension Liability
|
Plan Name |
Total Pension Liability |
|
Balances at 1/1/20XX |
$ |
|
Changes for the year: |
|
|
Service Cost |
|
|
Interest |
|
|
Changes in benefit terms |
|
|
Differences between expected and actual experience |
|
|
Changes of assumptions |
|
|
Benefit payments |
|
|
Other changes* |
|
|
Net changes |
|
|
Balance at 12/31/20XX |
|
*Identify other changes separately if individually significant
In addition to the information required above, the following information should be disclosed, if applicable:
a. The measurement date of the total pension liability, the date of the actuarial valuation on which the total pension liability is based, and, if applicable, the fact that update procedures were used to roll forward the total pension liability to the measurement date
b. If the employer has a special funding situation, the employer’s proportion (percentage) of the total pension liability, the basis on which its proportion was determined, and the change in its proportion since the prior measurement date
c. A brief description of changes of assumptions or other inputs that affected measurement of the total pension liability since the prior measurement date
d. A brief description of changes of benefit terms that affected measurement of the total pension liability since the prior measurement date
e. The amount of benefit payments in the measurement period attributable to the purchase of allocated insurance contracts, a brief description of the benefits for which allocated insurance contracts were purchased in the measurement period, and the fact that the obligation for the payment of benefits covered by allocated insurance contracts has been transferred from the employer to one or more insurance companies
f. A brief description of the nature of changes between the measurement date of the total pension liability and the employer’s reporting date that are expected to have a significant effect on the total pension liability, and the amount of the expected resultant change in the total pension liability, if known
g. The amount of pension expense recognized by the employer in the reporting period
h. The employer’s balances of deferred outflows of resources and deferred inflows of resources related to pensions, classified as shown in the table below:
Example:
At December 31, 20XX, the (city/county/district) reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
|
Plan Name |
Deferred Outflows of Resources |
Deferred Inflows of Resources |
|
Differences between expected and actual experience |
$ |
$ |
|
Changes of assumptions |
$ |
$ |
|
Payments subsequent to the measurement date |
$ |
$ |
|
TOTAL* |
$ |
$ |
* Total should agree to amounts presented in the financial statements.
i. A schedule for each of the subsequent five years, and in the aggregate thereafter, the net amount of the employer’s balances of deferred outflows of resources and deferred inflows of resources in the table above that will be recognized in the employer’s pension expense.
Example:
Deferred outflows of resources related to pensions resulting from the (city/county/district’s) payments subsequent to the measurement date will be recognized as a reduction of the total pension liability in the year ended December 31, 20XX [1]. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows:
|
Year ended December 31: |
Plan Name |
|
20X1 |
$ |
|
20X2 |
$ |
|
20X3 |
$ |
|
20X4 |
$ |
|
20X5 |
$ |
|
Thereafter |
$ |
j. The amount of revenue recognized for the support provided by nonemployer contributing entities, if any
Footnote:
[1] This should always be the fiscal year immediately following the year that is reported in the financial statements.