Compliance December 22, 2015

GASB Issues Several New Standards for Governmental Plans

The guidance is related to accounting and financial reporting of fiduciary activities, certain asset retirement obligations, and pension issues.
Reported by

The Governmental Accounting Standards Board (GASB) has made good its promise to issue Exposure Drafts proposing accounting and financial reporting guidance related to fiduciary activities, certain asset retirement obligations, and pension issues.

The Exposure Draft, Fiduciary Activities, would establish guidance regarding what constitutes fiduciary activities for financial reporting purposes, the recognition of liabilities to beneficiaries, and how fiduciary activities should be reported. The proposed Statement would apply to all state and local governments.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

The Exposure Draft, Certain Asset Retirement Obligations, would establish guidance for determining the timing and pattern of recognition for liabilities related to asset retirement obligations and corresponding deferred outflows of resources. An asset retirement obligation is a legally enforceable liability associated with the retirement of a tangible capital asset, such as the decommissioning of a nuclear reactor.

The Exposure Draft, Pension Issues, addresses practice issues raised by stakeholders during the implementation of Statements No. 67, Financial Reporting for Pension Plans, and No. 68, Accounting and Financial Reporting for Pensions.

“These proposed standards are designed to improve the reporting of important activities and transactions in governmental financial statements,” says GASB Chair David A. Vaudt. “The proposals addressing fiduciary activities and certain asset retirement obligations would establish guidance in areas where little or none exists today. The Exposure Draft addressing pension issues comes in response to issues raised by GASB stakeholders as they carried out the process of implementing the recent pension standards. Together, these proposals are designed to improve consistency, comparability, and clarity in governmental accounting and financial reporting.”

The Exposure Drafts are available on the GASB website. Stakeholders are encouraged to review and provide comments on the Exposure Drafts by the following dates:

  • Pension Issues—February 12, 2016;
  • Fiduciary Activities—March 31, 2016; and
  • Certain Asset Retirement Obligations—March 31, 2016.
NEXT: Objectives of the proposed statements

The GASB explains that governments currently are required to report fiduciary activities in fiduciary fund financial statements. Existing standards are not explicit, however, about what constitutes a fiduciary activity for financial reporting purposes. Consequently, there is diversity in practice with regard to identifying and reporting fiduciary activities.

The central objective of the Exposure Draft, Fiduciary Activities, is to enhance the consistency and comparability of fiduciary activity reporting by state and local governments. The proposal also is intended to improve the usefulness of fiduciary activity information, primarily for assessing the accountability of governments in their roles as fiduciaries.

Under the Exposure Draft, Certain Asset Retirement Obligations, a government that has legal obligations to perform future asset retirement activities related to its tangible capital assets would be required to recognize a liability and a corresponding deferred outflow of resources. The proposal identifies the circumstances that determine if and when to recognize these transactions.

The GASB explains that existing laws and regulations require state and local governments to take specific actions to retire certain capital assets, such as the removal and disposal of wind turbines in wind farms, and the dismantling and removal of sewage treatment plants. Other obligations to retire certain capital assets may arise from contracts or court judgments.

The objective of this proposed statement is to enhance the comparability of financial statements by establishing uniform criteria for governments to recognize and measure these asset retirement obligations, including obligations that previously may not have been reported. This proposed Statement also would enhance the usefulness of the information provided to financial statement users by requiring disclosures related to these asset retirement obligations.

The objective of the Exposure Draft, Pension Issues, is to improve consistency in the application of accounting and financial reporting requirements for employers related to pensions and for pension plans by addressing certain practice issues.

Specifically, this proposed statement would address issues regarding:
  • Presentation of payroll-related measures in required supplementary information;
  • Selection of assumptions and the treatment of deviations from the guidance in Actuarial Standards of Practice for financial reporting purposes; and
  • Classification of payments made by employers to satisfy employee contribution requirements.
Data and Research December 22, 2015

EBRI Questions Important Source of Plan Usage Data

A new report from EBRI describes an interesting anomaly that emerged in the most recent population survey published by the U.S. Census Bureau.

Reported by

According to a new report from the Employee Benefit Research Institute EBRI, estimates from the new and redesigned Current Population Survey (CPS) show a confusing drop in the percentage of Americans who participate in a workplace retirement plan.

So contrary are the results to recent provider-sponsored and independent reporting that EBRI suggests the CPS results “raise doubts about the use of CPS data to assess current and future retirement plan coverage policies.”

Get more!  Sign up for PLANSPONSOR newsletters.

“At issue is the Annual Social and Economic Supplement (fielded in March) to the Census Bureau’s CPS, which is one of the most-cited sources of income data for retirement-age Americans,” EBRI explains. “The Census Bureau redesigned the income questions starting in the 2014 survey in response to findings that this survey has misclassified and generally under-reported income (in particular, sources of retirement income).”

EBRI says the redesign of the survey “did capture more income (especially pension income), but it also significantly lowered the survey’s estimates of retirement plan participation among those most likely to participate. Furthermore, these new CPS participation results trended downward in contrast to other surveys on retirement plan participation.”

EBRI suggests the reported drop in participation levels is perhaps tied in part to the conflicting time series of the participation levels in CPS relative to other surveys, “notably from the U.S. Bureau of Labor Statistics National Compensation Survey.” Craig Copeland, EBRI senior research associate and author of the report, says the discrepancies “raise doubts about the use of CPS participation data, especially for time series trends on retirement participation levels.”

NEXT: Survey design changes

As the EBRI report points out, in 2014, researchers at the Census Bureau conducted a test of the new set of CPS-income questions by doing a “spilt-panel design.”

“The new questionnaire resulted in higher percentages of individuals with pension income, but lower percentages of workers with a workplace retirement plan for that same year,” EBRI finds. “Specifically … in the 2014 CPS, which provides results for 2013, both the traditional questionnaire and a split sample design for the redesigned questionnaire were used to conduct the survey. Under the traditional survey design, the percentage of all workers found to be working for an employer that sponsored a plan was 50.2%, compared with 47.6% from the redesigned questionnaire, a difference of 2.6 percentage points.”

EBRI finds for full-time, full-year wage and salary workers ages 21 to 64 (those most likely to participate in a plan) the difference was even larger at 3.7 percentage points, or 60.8% traditional vs. 57.1% redesigned. For public-sector workers ages 21 to 64 the difference was 3.3 percentage points. 

The 2015 survey continued with the redesigned questionnaire, EBRI notes, and the percentages of workers working for an employer that sponsored a plan were found to have decreased among each work force. “In particular, the percentage of full-time, full-year wage and salary workers ages 21 to 64 working for an employer that sponsored a plan declined by 2.7 percentage points from 2013 to 2014,” EBRI finds.

Compared with other reports the findings are particularly confusing, EBRI concludes. “The decline contradicted the findings from the Bureau of Labor Statistics’ National Compensation Survey (NCS). This survey found that the percentage of private-sector wage and salary workers at establishments with 500 or more employees participating in an employment-based retirement plan increased in 2014 to 77% from 76% in 2013.”

The full report, “The Effect of the Current Population Survey Redesign on Retirement-Plan Participation Estimates,” is published in the December 2015 EBRI Notes and online at www.ebri.org. 

«