New financial reporting standards for pensions of state and local governments are among the most significant rules GASB has ever approved.

The standards will place unfunded pension liabilities on the balance sheets of state and local governments that provide defined benefit pensions and call for immediate recognition of more pension expense than previously has been required.

Governments and the pension plans that serve them are learning how to implement these standards. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, is effective for governments for fiscal years beginning after June 15, 2014. Statement No. 67, Financial Reporting for Pension Plans, which addresses reporting by pension plans that administer benefits for governments, takes effect for financial statements for periods beginning after June 15, 2013.

GASB has provided a toolkit, available at, that is designed to assist in implementation. The AICPA State and Local Governments Expert Panel also is developing guidance related to the pension standards to aid in implementation and development of best practices.

In a GASB webcast, GASB Chairman David Vaudt said that plan administrators and governments need to focus on five key areas for successful implementation:

1. Pension funding policy. The direct link between measurement for funding purposes and measurement for pension expense purposes has been removed in the new standards. Governments using actuarially based funding will need to decide how this will affect their funding policy, Vaudt said.

2. Selection of assumptions. The standard requires government employers and the pension plans that serve them to use the same set of assumptions in the information they disclose. This means governments and plans will have to work together to select their assumptions, Vaudt said.

3. Timing of measurements. Plans will be required to report information about the net pension liabilities of the governments they serve, which must be measured at the end of the plan’s fiscal year. It’s possible that governments will not have the same fiscal year as the plan, so they will have some flexibility in the measurement date of the net pension liability reported on their financial statements, Vaudt said.

4. Frequency of timing of actuarial valuations. Actuarial valuations must be prepared at least every two years under the new standard. The plan’s valuation date can be no more than 24 months prior to the plan’s fiscal year end. The date for governments may be no more than 30 months prior to the government’s fiscal year end. “When the plan and the government employer year ends are different, attention to the timing of the actuarial valuation will be critical to meeting the needs of both the plan and the government,” Vaudt said.

5. Employer reporting information. Governments and multiemployer plans will have to report certain information that is derived from information reported by plans. This will require cooperation to determine who will be responsible for the cost of developing this information and whose auditor will provide assurance on that information, Vaudt said.

GASB altered the transition provisions of one of the pension standards to eliminate a potential source of understatement.

The board determined that the transition requirements of GASB Statement No. 68 contained a potential source of understatement of restated beginning net position and expense in a government’s first year of implementation.

GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, is designed to correct the potential understatement. GASB No. 71, available at, requires a state or local government that is transitioning to the new standards to recognize a beginning deferred outflow of resources for its pension contributions made between the measurement date of the beginning net pension liability and the beginning of the initial fiscal year of implementation.

State and local governments will be required to recognize this amount regardless of whether it is practical to determine the beginning amounts of all other deferred outflows and deferred inflows of resources related to pensions.

The provisions take effect simultaneously with GASB Statement No. 68, which is required to be applied in fiscal years beginning after June 15, 2014.


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