Pension funds for government retirees are placing a mounting burden on state and local governments – many of whom promised employees generous retirement benefits in lieu of pay raises for years. Recent reports estimate pension obligations in this country to range from $285 billion up through $1 trillion.
The Governmental Accounting Standards Board (GASB) has announced plans to examine reporting requirements for state and local government pension plans in two separate but related projects.
The first undertaking involves the development of enhanced disclosure requirements by governments about their pension plans, to bring them more closely in line with standards for other post-employment benefits (OPEB), set forth in GASB’s Statement 45.
According to Dean Mead, GASB Project Manager, several factors prompted the agency to examine current reporting requirements for pension funds. In addition to the fact that pensions and pension reporting have become a pressing issue in the public arena, pension standards have now been in place for a decade, and it’s time to examine their effectiveness.
“We committed in our strategic plan to review major standards periodically to determine if they are effective – that is, that they provide the information that municipal analysts and other financial statement users need.”
Mead also points to the implementation of the new OPEB standards. GASB’s Board has added a project to its current technical agenda that work toward conforming the pension disclosure standards to the OPEB requirements, which include several provisions that the Board considers to be improvements over the pension standards.
GASB plans to release an exposure draft for the conforming disclosure project by the end of 2006, with a final statement issued in May 2007.
After determining the effectiveness of current requirements for government pension plans through a related research project, the Board will decide if any changes are appropriate.
This research will involve feedback from users of financial statements, to better understand the pension-related information they use, how they use it, and how its usefulness could be enhanced. The other arm of the research undertaking will examine government pension accounting policy choices, methods and assumptions as well as funding policy, practice and progress.
Based on these findings, the GASB Board is scheduled make its decision on whether or not to revise the standards in May 2008.
GASB establishes and enforces financial reporting standards for state and local governments and agencies.