Project Pages

Pension Disclosures—Conforming Changes

Primary Objective: This project amended GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform to certain disclosures and required supplementary information presentations for pensions to those required for other postemployment benefits by Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.

Status: Statement No. 50, Pension Disclosures, was issued on May 31, 2007.

Pension Disclosures—Conforming Changes—Minutes for Deliberations

Minutes of Meeting, May 1-3, 2007

The Board discussed a ballot draft of Statement No. 50, Pension Disclosures, made a minor editorial change, and unanimously approved the Statement for issuance.

Minutes of Meeting, April 27, 2007 Teleconference

The Board discussed a preballot draft of the proposed Statement No. 50, Pension Disclosures, and suggested a number of revisions to clarify certain points.

Minutes of Meeting, April 3-5, 2007

The Board reviewed respondent comments to the Exposure Draft (ED), Pension Disclosures, and tentatively agreed to retain the following provisions in the final Statement:

  • Note disclosure of methods and significant assumptions used to estimate the fair value of investments if it is based on other than quoted market prices
     
  • Note disclosure of legal or contractual maximum contribution rates and, if applicable, that the projection of benefits does not incorporate those limitations
     
  • For actuarial assumptions that are different for successive years, disclosure in the notes to the financial statements of the initial and ultimate assumptions
     
  • Note disclosure of the manner in which the contractually required contribution of cost-sharing employers is determined
     
  • Presentation of required supplementary information (RSI) schedules by cost-sharing employers when those schedules are not in a publicly available report.

The Board also discussed comments received regarding the ED proposal to require note disclosure of funded status as of the most recent actuarial valuation date and, for pension plans, relocation of information about actuarial methods and assumptions from notes to RSI to notes to the basic financial statements. The Board tentatively reaffirmed its conclusions that information about funded status is essential to the understanding of users of plan and employer financial statements and that within the structure established in Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements, with regard to presentation of information in basic financial statements, it is appropriate to require funded status information to be disclosed in notes to the financial statements.

The Board also discussed concerns raised by respondents with regard to the ED proposal to require use of the entry age actuarial cost method as a surrogate for funded status information for plans and employers that use the aggregate actuarial cost method to determine the annual required contribution (ARC). These included concerns about the potential cost associated with obtaining information needed to meet the proposed requirement. A majority of the Board tentatively reaffirmed the view that the potential benefit of providing funded status information to users outweighs the potential incremental cost of doing so and agreed to retain the requirement for use of a surrogate method of calculating such information by plans and employers that use the aggregate actuarial cost method.

The Board also considered respondents’ comments with regard to the proposal to require in notes to the financial statements a reference linking the funded status information to the schedule of funding progress in RSI. A majority of the Board tentatively agreed that the requirement should be carried forward to the final Statement and, in doing so, reaffirmed that the purpose of the disclosure would be to provide an informative link from the funded status information disclosed in the notes to financial statements as of the most recent actuarial valuation date to the funding progress trend information presented as RSI. To address the concerns expressed by some respondents to the ED with regard to the potential for confusion regarding the amount of involvement of the entity’s auditor with the information presented in RSI, the Board tentatively agreed to add a footnote to the standards section of the final Statement to explain that the reference to information in RSI does not incorporate that information into the notes to the financial statements. The Board also noted that the new requirement for a linking disclosure in the notes to the financial statements effectively would supersede the requirement in paragraph 27 of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, that requires that a plan include in the statement of plan net assets a reference to the schedule of funding progress in RSI.

The Board also discussed comments received with regard to the ED proposal to include other narrative note disclosures of an informative nature regarding the actuarial measurement process. After deliberation of the points raised by respondents and reconsideration of the proposal relative to the discussion in Concepts Statement 3 with regard to presentation of information in notes to the financial statements, the Board tentatively agreed not to include the proposed narrative disclosures in the final Statement.

The Board also tentatively reaffirmed that the requirements of the Statement generally would be effective for periods beginning after June 15, 2007, with early implementation encouraged. However, a modification was made in response to concerns expressed by some respondents that the requirements with regard to presentation of funded status information calculated using a surrogate actuarial method by plans and employers that use the aggregate actuarial cost method for purposes of determining the ARC would require some entities to obtain additional information from valuations that already had been completed. To avoid that result, the Board agreed to modify the effective date with regard to those requirements to allow those plans and employers to present the additional required actuarial information beginning in financial statements that present information resulting from the plan’s first actuarial valuation date on or after June 15, 2007. The Board also tentatively agreed to retain the transition provisions proposed in the ED with regard to development of a schedule of funding progress by those plans and employers.

Minutes of Meeting, March 12, 2007 Teleconference

The Board received an update on the status of the project. No deliberations were conducted.

Minutes of Meeting, November 29–December 1, 2006

The Board reviewed a ballot draft of the Exposure Draft, Pension Disclosures, which proposes amendments to Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform certain pension note disclosures and required supplementary information presentation requirements to those for OPEB. The Board approved issuance of the Exposure Draft with minor editorial changes.

Minutes of Meeting, November 6, 2006 Teleconference

The Board reviewed a preballot draft of an Exposure Draft that would propose amendments to Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform certain pension note disclosures and required supplementary information presentation requirements to those for OPEB. Board members provided editorial suggestions on a number of portions of the draft. The Board is scheduled to discuss a ballot draft of the document at its November-December meeting.

Minutes of Meeting, October 10–12, 2006

The Board considered potential amendments to the note disclosure and required supplementary information (RSI) of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform pension plan and employer requirements to the requirements of Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. After discussion, the Board tentatively agreed to propose that defined benefit pension plans and sole and agent employers disclose the following information in notes to the financial statements:

  • The funded status of the plan as of the most recent actuarial valuation date. Accordingly, plans also would relocate the disclosure of actuarial methods and significant assumptions used in the most recent actuarial valuation from notes to RSI to notes to the financial statements.
     
  • If the aggregate actuarial cost method is used to determine the annual required contribution of the employer (ARC), the funded status of the plan—and the funding progress presented as RSI—using the entry age actuarial cost method as a surrogate, with explanation that the purpose is to provide information that approximates the funded status and funding progress of the plan.
     
  • Narrative disclosures of an informative nature regarding the actuarial measurement process and a reference linking the funded status information disclosed in the notes to the financial statements to the required schedule of funding progress following the notes the financial statements.
     
  • The method and assumptions used to determine the fair value of investments, if the fair value is based on other than quoted market prices. It was tentatively agreed that defined contribution plans also should disclose this information.
     
  • Legal or contractual maximum contribution rates, if applicable.
     
  • Initial and ultimate rates if select and ultimate assumptions are used in the actuarial valuation.

The Board also tentatively agreed to propose that if a cost-sharing plan in which an employer participates does not issue and make publicly available a stand-alone plan financial report prepared in accordance with the requirements of Statement 25, as amended, and the plan is not included in the financial report of a public employee retirement system or another entity, the cost-sharing employer should present as RSI in its own financial report schedules of funding progress and employer contributions for the plan (and notes to these schedules), prepared in accordance with the requirements of Statement 25, as amended. In this circumstance, the cost-sharing employer also should disclose that the information presented relates to the cost-sharing plan as a whole, of which the employer is one participating employer, and should provide information useful for understanding the scale of the information presented relative to the employer.

In regard to the potential effective date of the changes, it tentatively was agreed that that the proposal would be effective for periods beginning after June 15, 2007, with early implementation encouraged. It also tentatively was agreed that in the initial year of implementation, pension plans and sole and agent employers that use the aggregate actuarial cost method to determine the ARC would be required to present elements of information in the schedule of funding progress using the entry age actuarial cost method as of the most recent actuarial valuation date. In subsequent years, information would be added to that schedule as of subsequent actuarial valuation dates until the requirements of Statements 25 and 27, as amended by the proposal, with regard to the minimum number of years or actuarial valuations to be included were met.

Pension Disclosures—Conforming Changes—Major Tentative Decisions to Date

Statement No. 50, Pension Disclosures, was approved in May 2007.