GASB Update - Statement No. 73

GASB Statement No. 73 Establishes Single Framework for Pension Plan Accounting and Financial Reporting In June 2015, the Governmental Accounting Standards Board (GASB) released Statement No. 73 Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68.

Effective Dates Statement No. 73 requirements are effective for fiscal years beginning after June 15, 2015 except those provisions that address accounting and reporting by employers and governmental nonemployer contributing entities for pensions that are not within the scope of Statement 68, which are effective for financial statements for fiscal years beginning after June 15, 2016. The GASB encourages earlier application.

Single Framework Highlights Improvement Efforts Statement No. 73 establishes a single framework for presenting state and local government pension plan information. By directing governments to apply a single framework for financial reporting on pension plans, the GASB seeks to enhance the comparability of pension-related information reported by employer and non-employer contributing entities.

In many respects, Statement No. 73 extends guidance featured in Statement No. 68 – Accounting and Financial Reporting for Pensions. Statement No. 68 established requirements for pension plans administered through a trust (or equivalent) that meet the following criteria:  Pension plan contributions are irrevocable, as are contribution earnings  Pension plan assets are dedicated to providing pensions in accordance with benefit terms  Pension plan assets are protected from creditors Statement No. 73 essentially extends Statement No. 68 requirements to pension plans that meet those criteria, but are not administered through a trust or equivalent arrangement.

What Statement No. 73 Amends for Statement No. 67 and Statement No. 68 In addition to establishing requirements for pension plans not administered through a trust, Statement No. 73 also introduces substantial amendments for Statement No. 67 – Financial Reporting for Pension Plans – and Statement No. 68. Amended items address:  Informational notes for the 10-year schedules of required supplementary information (RSI) pertaining to factors that significantly affect trends in amounts reported  Separately-financed specific liabilities of individual employer and non-employer contributing entities for defined benefit pension plans  Employer recognition of revenue for the support of non-employer contributing entities not in a special funding situation

GASB Statement No. 73 – Page 1

What is Beyond the Scope of Statement No. 73 Items other than retirement income that are provided separate from the pension plan are addressed

by GASB statements for other postemployment benefits (OPEB). Such benefits include health care plans, disability insurance and life insurance.

Summary Statement No. 73 establishes a single accounting and financial reporting framework for defined benefit pension plans, thereby extending the scope of Statement No. 68. The release of Statement No. 73 represents one of the GASB’s recent efforts to improve guidance to state and local governments for accounting and financial reporting concerns in general, and pension plan and other retirement benefits concerns in particular. Entities responsible for such accounting and financial reporting concerns need to be aware of these new requirements and compliance dates.

GASB Statement No. 73 – Page 2