Pension fund disclosures will soon look more like those of other post-employment benefits under a new statement issued by the Governmental Accounting Standards Board.Statement 50, Pension Disclosures, amends Statement 25, on reporting on defined-benefit pension plans, and Statement 27, on accounting for pensions by governmental employers. The amendments make disclosures under those two statements consistent with the requirements of Statements 43, on reporting OPEB, and 45, on reporting on OPEB by governmental employers.

Parry Young, a director in the public finance department of Standard & Poor's, praised the transparency that Statement 50 brings to financial reports on pension plans and the enhanced ease of using them. "I'm a municipal bond analyst, and I use these financial statements every day," he explained. "GASB 50 will provide greater transparency and comparability between reporting on pensions and other post-employment benefits."

GASB Chairman Robert Attmore characterized the new standard as an extension of the improvements that were made to reporting on retiree health insurance and other non-pension retirement benefits affected by Statements 43 and 45.

In fact, the need for this narrowly scoped project was raised even as the board was discussing those two statements. As the board decided to enhance certain disclosures and related required supplementary information, or RSI, it realized the advantages of extending the same enhancements to pension fund disclosures, thus creating a consistency in the reporting of all post-employment benefits.


The most significant changes regard the reporting of the funding status of a pension or OPEB plan, comparing the actuarial value of the asset with the actuarial accrued liability.

"This piece of information is of extraordinary value to a wide range of financial statement users," said GASB project manager Dean Mead. "It's one of those pieces of information that is found to be equally valuable to analysts and rating agencies, to staff people working at taxpayer associations."

Under Statement 50, notes to financial statements should disclose the funding status of a pension plan as of the most recent actuarial valuation date. Defined-benefit pension plans will disclose actuarial methods and assumptions used in actuarial valuation in notes to the financial statement, rather than in the notes to the RSI.

The change could mean a little more work for governmental entities that use the aggregate actuarial cost method to determine annual required contributions. Though few pension plans use this relatively aggressive method, those that do tend to be especially large. Notes to financial statements reporting on these plans will have to disclose the funded status of the plan, and a schedule of funding progress must be presented as an RSI using the entry age actuarial cost method.

Due to the nature of aggregate actuarial cost method, funded status information is not produced as part of the actuarial process, and therefore did not appear in financial statements. The board considered the burden of providing the additional information, but decided that the substantial benefits outweighed the extra effort.

"This fills in a pretty significant informational void for anyone who was using the financial statements of a government that used the aggregate method," Mead said, adding that he doubted governments would change their actuarial methods to avoid a little extra work.

The new standard also requires the notes to statements to include a reference linking the funded status disclosures in the notes to the required schedule in the RSI. Notes will also have to disclose any legal maximum contribution rates, and whether any such maximums were taken into consideration in actuarial projections.

The change comes just as investors and taxpayers are more carefully scrutinizing the long-term implications of existing post-retirement benefits.

Statement 50 is effective for periods beginning after June 15, 2007, with early implementation encouraged. Requirements relating to governments using the aggregate actuarial cost method are effective for financial statements and RSI that contains information from actuarial valuations as of June 15, 2007.

Once Statement 50 has gone into effect, the board expects to conduct research to learn how effective existing standards on pension reporting have been. The board may then consider whether further changes should be made.

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