IMRF participating employers who report using Generally Accepted Accounting Principles (GAAP) are required to follow rules established by the Governmental Accounting Standards Board (GASB). In June 2012, GASB issued statement number 68 with the objective of improving accounting and financial reporting on pensions by government entities. IMRF is presenting this online resource to aid participating employers in implementing the new standards required by GASB 68.
The requirements on IMRF employers established by GASB 68 can be summarized into four processes. IMRF employers are required to:
- Project the future benefit payments for current and former employees and their beneficiaries.
- Discount those payments to their present value.
- Allocate the present value over past, present, and future periods of employee service.
- Disclose future inflows and outflows.
Long Term Expected Real Rate of Return by Asset Class
as of 12/31/2015Long Term Expected Real Rate of Return by Asset Class as of 12/31/2015
|Asset Class||Target Allocation||Return 12/31/15||Projected Returns/Risk|
|One Year Arithmetic||Ten Year Geometric|
A recording of the 2014 webinar hosted by IMRF Executive Director Louis Kosiba and IMRF CFO Mark Nannini.
GASB 68 Frequently Asked Questions
Established by the Governmental Accounting Standards Board (GASB), GASB 68 was introduced to improve accounting and financial reporting on pensions by government entities. IMRF participating employers that report using Generally Accepted Accounting Principles (GAAP) are required to follow rules established by GASB. To assist in compliance, IMRF offers this compilation of frequently asked questions:
1. Where can I find the active, inactive, and annuitant counts for my employer?
The annual actuarial report for GASB 68 includes these counts at the top of page 1.
2. Is there an annual IMRF audit detailing an employer’s pension position?
There are several items that detail the employer’s pension position:
The annual GASB 68 Report is prepared for each employer by plan (Regular, SLEP, or ECO).
The Schedule of Changes in Fiduciary Net Position by Employer is completed annually and shows each employer’s Fiduciary Net Position. This schedule is opinioned upon by IMRF’s external auditor.
The Census Attestation contains the opinion of IMRF’s auditors on management’s assertion that the census data sent to the actuary each year is complete and accurate.
The last item needed is IMRF’s SOC-1 Type 2 Report which details IMRF’s internal controls related to the preparation of the Schedule of Changes in Fiduciary Net Position.
All of these documents are available on IMRF’s website, www.imrf.org, in Employer Access.
3. How can an employer determine the number of new retirees per fiscal year?
4. As an employer, how can my auditor rely on the information presented by IMRF on the employer’s behalf?
IMRF goes through a SOC-1 Type 2 audit that reviews the controls of IMRF for each objective stated and tested in the SOC-1 Type 2 Report. The SOC-1 Type 2 Report certifies that these controls are in place for the whole period of time that is reviewed. The current SOC-1 Type 2 Report is effective from January 1, 2015, through March 31, 2016.
5. What guidance has the American Institute of Certified Public Accountants (AICPA) issued related to employers participating in agent-multiple employer defined benefit pension plans for GASB 68?
The AICPA State and Local Government Expert Panel (SLGEP) issued a whitepaper entitled “Governmental Employer Participation in Agent Multiple-Employer Plans: Issues Related to Information for Employer Reporting” (Agent Whitepaper), which addresses numerous issues from the employer and employer auditor perspective that may arise from the implementation of GASB 68. The Agent Whitepaper is available online at www.gasb.org.
Additionally, the AICPA issued a series of auditing interpretations that address specific questions pertaining to both the auditors of the agent plans and employers. These interpretations support some of the conclusions reached in the Agent Whitepaper and include interpretations of AU-C 500, “Audit Evidence,” and AU-C 805, “Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement.” These auditing interpretations are available online at www.aicpa.org.
6. What information does IMRF provide to employers that issue audited financial statements (accrual basis) in accordance with Generally Accepted Accounting Principles (GAAP) to assist employers in reporting pension amounts and disclosures under GASB 68? What audit assurance is provided on this information?
Beginning with the year ended December 31, 2014, IMRF provides the information IMRF employers who report according to GAAP need to properly report for GASB 68. These documents are in Employer Access:
An Actuarial Valuation Report specific to your employer. A sample report is currently available for the year ended December 31, 2015.
An Attestation Report. IMRF’s auditors will perform an examination in accordance with AT Section 101, Attest Engagements, on IMRF’s assertion on the completeness and accuracy of the census data maintained by IMRF for inactive and retired participants, and the accumulation of the census data provided to the actuary.
A Schedule of Changes in Fiduciary Net Position specific to your employer. For 2014, the Schedule only included the information separately for employers upon request. For the year ended December 31, 2015, the Schedule includes all employers.
A SOC-1 Type 2 Report on the operating effectiveness of IMRF’s controls over the allocations of additions and deductions to employer accounts, beginning January 1, 2015, through March 31, 2016.
7. How do employers access the audited Schedule of Changes in Fiduciary Net Position by Employer?
Once completed and approved by the IMRF Board of Trustees, the audited Schedule of Changes in Fiduciary Net Position by Employer will be available in Employer Access. The target date for report availability is the end of May each year.
8. Do employers that issue unaudited financial statements or financial statements prepared in accordance with a special purpose framework, such as cash basis or modified cash basis, need the audited information for GASB 68 for disclosure in the notes to the financial statements?
If your employer does not issue audited financial statements that are prepared in accordance with GAAP, then your employer does not need a GASB 68 Report and should not have previously requested a report. The fees to produce a GASB 68 Report for each employer are very costly.
9. Will IMRF allocate the pension amounts reported to employers in the GASB 68 Report and the Schedule of Changes in Fiduciary Net Position to enterprise funds or component units for an employer (primary government)?
No. All funds and component units of government are reported under the same IMRF employer number. Accordingly, IMRF does not have the information to separately identify pension amounts for funds or component units for an employer. In accordance with GASB 68, each employer will have to allocate the pension amounts to enterprise funds and component units, as applicable, using the allocation methodology for cost-sharing plans discussed in paragraphs 48-82 of GASB 68.
10. What is the measurement date for employers to record the pension amounts in their financial statements under GASB 68?
The measurement date must be within 12 months and one day of the employer’s year-end. The measurement date will always coincide with IMRF’s fiscal year-end: December 31.
For employers with a different year-end than IMRF, the measurement date will always be the December 31 preceding the employer’s year-end. For example, if an employer has a year-end of June 30, 2016, the measurement date used for GASB 68 would be December 31, 2015.
Employers that have the same year-end as IMRF (December 31) can choose to use the current year-end or the prior year-end for the measurement date. For example, if an employer has a year-end of December 31, 2015, the employer can choose to use December 31, 2015, or December 31, 2014, as the measurement date. However, once selected, the employer must use the measurement date consistently in future years.
11. To be able to use the audited schedules provided by IMRF, what are the employer and employer auditor responsibilities?
Each employer’s auditor will have a different approach, but the general guidance from the AICPA states:
Support the assumptions with appropriate, reliable, and verifiable information. In the case of the discount rate, management should be able to support the discount rate specific to the employer (not the plan as a whole) based on a projection of the employer-specific fiduciary net position and the amount of projected benefit payments expected to be paid from available employer-specific fiduciary net position in future periods. A discount rate calculation with projections will be included in each actuarial valuation report provided to the employer.
Support the underlying census data used by the actuary. Management should obtain, on an annual basis, the census data file submitted by the plan to the actuary and determine whether the census data is complete and accurate. In evaluating the census data file, the employer may compare the information to underlying payroll records and the prior year census data file. The employer may also obtain a roll forward of the census data from one year to the next and review a reconciliation for any significant differences.
To use the work of the actuary as audit evidence, the employer auditor should: evaluate the competence, capabilities, and objectivity of the actuary; obtain an understanding of the work of the actuary; and evaluate the appropriateness of the actuary’s work as audit evidence, as discussed in paragraph .08 of AU-C section 500. The employer auditor will also need to obtain the census data file and perform certain audit procedures described in the Agent Whitepaper.
12. How will employers and their auditors obtain the census data file?
The census data used for each employer will be available after the first quarter of the following calendar year in Employer Access.
13. To implement GASB 68, should there be a prior period adjustment?
According to paragraph 137 of GASB 68, to the extent practical, in the first period that the statement is applied, changes should be reported as an adjustment of prior periods, and the periods affected should be restated. It may not be practical for some governments to determine the amounts of all deferred inflows and outflows of resources related to pensions, as applicable, at the beginning of the period the statement is adopted. In such circumstances, beginning balances for deferred inflows and outflows related to pensions should not be reported. Please consult the GASB statement for further guidance.
14. Can you explain why the discount rate is not an expected value based on 7.5% and the Municipal Bond Rate using a percentage of funded for weighting?
As required by paragraph 40 of GASB 67, the discount rate uses a calculation based on several factors:
A long-term rate of return on pension plan investments (to the extent that the plan’s fiduciary net position is projected to be sufficient to pay benefits), and
A tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average of AA credit rating as of the measurement date (to the extent that the plan’s projected fiduciary net position is not sufficient to pay benefits).
It is expected that the discount rate will be a single, blended discount rate calculated in accordance with GASB 67.
15. Do I need to implement GASB 68 after June 2015?
Employers with fiscal year end dates after June 15 would use the measurement date of December 31. It is recommended an employer implements GASB 68 if they produce an annual report based on modified accruals and in accordance with GAAP. Employers should discuss this with their external auditor.
16. Does the information provided in the IMRF reports provide IMRF expense on the government-wide basis? Are the contributions made by the government still the expense for the fund basis statement?
Yes, the information provided by IMRF should be used to record the pension amounts in funds that report on the accrual basis of accounting and in the government-wide financial statements, since those are also on the accrual basis of accounting. The accounting for funds that report on the modified accrual basis or cash of accounting was not changed by GASB 68.
17. As an auditor, who should we contact with questions about our IMRF clients?
Any and all questions may be directed to:
Mark Nannini, Chief Financial Officer, phone: (630) 368-5345
Jim Splitt, Financial Analyst, phone: (630) 706-4260