GASB Accounting Statements 25, 27, 43 & 45
The GASB Accounting dialog box contains the parameters for certain governmental accounting standards for OPEB mode (GASB statements 43 and 45) and U.S. public pension mode (GASB statements 25 and 27). In OPEB mode, it is accessed under the Accounting Methodology topic, by selecting the "GASB 43/45" option for expense calculations.
See Accounting Methodology for a discussion of parameters required for calculations under GASB statement 67 (Financial Reporting for Pension Plans) and GASB statement 68 (Accounting and Financial Reporting for Pensions). Parameters required for calculations under the other GASB standards are discussed below.
GASB statements 25 and 27 cover reporting requirements for pension plans and U.S. public employers that sponsor them, respectively. Similarly, GASB statements 43 and 45 apply to OPEB plans. The same liabilities are used for funding and these GASB accounting standards, so (generally) only a funding valuation is necessary.
The key reporting elements that are within the scope of ProVal are the Annual Required Contribution (ARC) and the annual pension/OPEB cost. In U.S. public mode, these calculations are parameterized under the GASB Accounting topic of the Asset & Funding Policy. In OPEB mode, these calculations are parameterized under the Accounting Methodology topic of the Asset & Funding Policy (choose Expense calculations under “GASB 43/45”.).
The ARC is computed per the selected ARC Contribution Policy. Note that this can differ from the employer’s Contribution Policy as specified in the Contribution Policy topic, which, for example, might include additional contributions to pay off any Net Pension/OPEB Obligation.
The underlying actuarial cost method (for both the ARC contribution policy and employer’s contribution policy) is specified in the Contribution Policy topic. ProVal supports five of GASB’s six acceptable methods (attained age is not supported).
The annual Pension/OPEB cost is generally equal to the ARC. However, if employer contributions have historically differed from the ARC (current year differences aren’t reflected until the following year), a Net Pension/OPEB Obligation (NPO/NOO) is established. The annual Pension/OPEB cost is then adjusted by interest on the NPO/NOO and an amortization of the NPO/NOO. In a forecast, the Net Pension/OPEB Obligation reflects differences, if any, between the ARC contribution policy and the employer’s contribution policy.
All GASB Asset & Funding Policies require that funding amortization parameters be set, under the Funding Amortization Bases topic. The amortization information is necessary to calculate an appropriate Annual Pension/OPEB Cost.
If a “Normal Cost + Supplemental Cost” ARC contribution policy is selected, you may elect to Use Funding Amortization Bases, or enter different GASB amortization parameters (click No and then the Parameters button to enter different amortization parameters). This determines the ARC supplemental cost and the Net OPEB Obligation amortization.
Information about any existing Net Pension/OPEB Obligation (NPO/NOO) is also specified as part of the GASB parameters. If a Current Net Pension Obligation (NPO) or Current Net OPEB Obligation (NOO) exists, it is entered along with the (preliminary) remaining amortization period(s). The NPO/NOO amortization period may be overridden if an open amortization period is used for ARC supplemental cost or if an aggregate actuarial cost method is used (see below). Per GASB 27/45, the annual Pension/OPEB cost is adjusted by the discounted present value of the Net Pension/OPEB Obligation at the beginning of the year using the same amortization methodology used in determining the ARC for that year.
The accounting methodology dialog also controls the NPO amortization under aggregate funding methods or NOO amortization under aggregate funding methods. (That is, if the actuarial cost method specified under the Contribution Policy topic is aggregate.) The amortization is equal to the NPO/NOO divided by either:
The ratio of the present value of future lives to the number of valuation actives (with no interest adjustment), which produces the same effective amortization as the FIL level dollar method.
An annuity factor for a period equal to the FASB definition of expected average service to retirement. (An “accounting” valuation is required to calculate this amortization period, and rounding options are provided.)
An annuity factor with a user-specified amortization period.
Valuation Set and Deterministic Forecast Exhibits detail the Annual Required Contribution (new in the U.S. public Pension mode as well) and the development of the Net Pension/OPEB Obligation, including any adjustments required to meet the GASB minimum amortization requirements.