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Postemployment Benefit Accounting and Financial Reporting


Minutes of Meeting, November 8–10, 2011

The Board discussed a tentative plan for the completion of the first phase of the postemployment benefits accounting and financial reporting project—that related to pensions that are provided through qualified trusts or equivalent arrangements. This plan included a high-level overview of the issues raised during the comment period on the Exposure Drafts, Accounting and Financial Reporting for Pensions, and Financial Reporting for Pension Plans, and presented a tentative timeframe for addressing these issues. It tentatively was agreed that at its December 2011 meeting, the Board would begin deliberating project scope and plan definition issues raised by respondents. The Board also reviewed a summary of feedback from the field tests that were conducted during the comment period for the Exposure Drafts. No tentative decisions were requested in relation to that summary; however, the Board will refer to the field test results as individual topics are discussed. 

Minutes of Meeting, June 27–29, 2011

The Board reviewed the ballot draft and by a vote of 6-1 approved the issuance of the Exposure Draft, Accounting and Financial Reporting for Pensions. The Board also reviewed the ballot draft and unanimously approved the issuance of the Exposure Draft, Financial Reporting for Pension Plans. In addition, the Board reviewed and did not object to the issuance of the Plain-Language Supplement that will accompany the Exposure Drafts.

Minutes of Teleconference, June 14, 2011

The Board discussed (a) the service cost attribution approach that should be used for benefit arrangements that are not pay related; (b) the definitions of pension plan, covered payroll, and actuarially calculated employer contributions; (c) the classification of component units as employers; (d) disclosure requirements for nonemployer contributing entities involved in unconditional special funding situations; and (e) effective date provisions.

With regard to the service cost attribution approach for benefit arrangements that are not pay related, the Board tentatively agreed that the Exposure Draft should propose to require use of the level percentage of pay approach unless there is no projected pay for the employee (for example, when benefits are provided to volunteers). In circumstances in which there is no pay, the inflation assumption should be substituted for the salary increase assumption when applying the level percentage of pay approach.

In considering the proposed definitions of pension plan, the Board tentatively agreed that a pension plan for the purposes of these proposed standards should be defined as a trust or other fund through which assets dedicated to the payment of pensions are accumulated and pension benefits are paid as they come due in accordance with the benefit terms. It further agreed that the scope of the proposed plan Statements should extend only to pension plans that are administered through qualifying trusts or equivalent arrangements, which are trusts in which the following criteria are met:
 

  • Employer contributions to the plan, including contributions made by a nonemployer contributing entity on behalf of the employer(s), and plan earnings on those contributions are irrevocable.
     
  • Plan assets are dedicated to providing benefits to plan members in accordance with the benefit terms.
     
  • Plan assets are legally protected from creditors of the employer(s), any nonemployer contributing entities, and the plan administrator. For defined benefits, plan assets also are required to be legally protected from creditors of the plan members.

For pension plans that are not administered through qualified trusts, the Board agreed that the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, should continue to be applicable.

Similarly, the Board tentatively agreed that the scope of the proposed document related to accounting and financial reporting for pensions (by employers) should be limited to pensions that are provided through plans that are administered through qualified trusts or equivalent arrangements. For benefits not administered in that way, the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as amended, would continue to be applicable.

The Board also tentatively agreed to characteristics that should be included in the proposed definitions of covered payroll and actuarially calculated employer contributions. The Board tentatively agreed that covered payroll should be a measure of the total salaries provided to all plan members that are provided with benefits through the terms of the plan. The Board also agreed that the term actuarially calculated employer contribution should include the notions that it is a target or recommended amount of contributions to a defined benefit pension plan for a reporting period that is determined in conformity with Actuarial Standards of Practice using the most recent calculations available when the contribution for the reporting period was adopted.

With regard to the proposed classification of component units as employers, the Board tentatively agreed that a primary government and its blended and discretely presented component units that participate in the same plan should be classified as one employer for purposes of the proposed pension standards if the primary government and its component unit(s) are the only governments whose employees are provided with benefits through the plan. The Board further clarified that the primary government and the component unit(s) should be required to apply the accounting and financial reporting requirements for cost-sharing employers when preparing information for their stand-alone financial reports. However, in the financial report of the reporting entity that includes the primary government and its component units, the Board tentatively agreed that the note disclosure requirements of a single employer should be presented.

With regard to proposed note disclosure requirements for nonemployer contributing entities involved in unconditional special funding situations for defined benefit pensions, the Board tentatively decided that if the nonemployer contributing government is required to make a substantial portion of the legally required contributions to the plan, the governmental nonemployer contributing entity should follow the same requirements for note disclosures and required supplementary information with regard to the pensions that tentatively have been required for the employer. If the governmental nonemployer contributing entity is not legally required to make a substantial portion of the contributions to the plan, the Board tentatively agreed that the following note disclosures should be required:

  • The name of the pension plan through which benefits are provided, identification of the public employee retirement system or other entity that administers the plan, and identification of the arrangement as a single-employer, agent multiple-employer, or cost-sharing multiple-employer defined benefit pension arrangement.
     
  • The basis for determination of its actual contributions to the plan, including identification of the authority under which its contribution requirements are established or may be amended.
     
  • The amount of net pension liability, deferred pension outflows of resources, deferred pension inflows of resources, and pension expense recognized by the entity and the proportion (percentage) used to determine its recognized amounts.

With regard to proposed disclosure requirements for nonemployer contributing entities involved in unconditional special funding situations for defined contribution pensions, the Board tentatively decided that if the nonemployer contributing government is required to make a substantial portion of the legally required contributions to the plan, the governmental nonemployer contributing entity should be required to disclose information at the same level of detail as an employer. If the governmental nonemployer contributing entity is not legally required to make a substantial portion of the contributions to the plan, the Board tentatively agreed that the following note disclosures should be required:

  • The name of the plan, identification of the public employee retirement system of the other entity that administers the plan, and identification of the plan as a defined contribution plan.
     
  • The rates (in dollars or as a percentage of salary) used to determine amounts that are attributed to employees’ periods of service, including the rates for the nonemployer contributing entity, and the authority under which those rates are established or may be amended.
     
  • The amount that the nonemployer contributing entity recognized as pension expense in the period and the proportion (percentage) used to determine its recognized amount.

With regard to the proposed effective date of the proposed pension standards, the Board tentatively agreed that the requirements of the proposed Statements should be effective for periods beginning after June 15, 2012, for governments that would be required to report information about pensions provided through a single-employer plan that has net assets of $1 billion or more in the plan’s first fiscal year ended after June 15, 2010. For all other governments, the proposals tentatively would be effective for periods beginning after June 15, 2013.

Minutes of Meeting, May 23–25, 2011


The Board reviewed preballot drafts of the Exposure Drafts, Accounting and Financial Reporting for Pension Benefits by Employers and by Nonemployer Contributing Entities, and Accounting and Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Pension Plans. In addition, the Board discussed the Plain-Language Supplement that will accompany the Exposure Drafts. Individual Board members made recommendations and clarifying suggestions on all three documents. The Board is scheduled to review a ballot draft of the two Exposure Drafts at its meetings on June 27–29, 2011.

Minutes of Teleconference, May 2, 2011


The Board made tentative decisions regarding requirements for presentation of pension information in required supplementary information (RSI) by cost-sharing employers and by nonemployer contributing entities. In addition, the Board considered issues related to application of the entry age normal actuarial cost method, and the impact of earlier tentative Board decisions related to the timing of pension measurements on the audits of employer and pension plan financial statements.

With regard to RSI for cost-sharing employers, the Board tentatively agreed to propose that cost-sharing employers with no special funding situations be required to present the following:

  1. A 10-year schedule of changes in the net pension liability at the collective level presenting the total pension liability and plan net position at the beginning of the period, components of the current-period change, and the ending period balances of the total pension liability and plan net position.
     
  2. A set of 10-year schedules presenting the following:

    1. At the collective level: the total pension liability, the amount of the plan trust’s net position, the net pension liability, the plan trust’s net position as a percentage of the total pension liability, covered payroll, and the net pension liability as a percentage of covered payroll
       
    2. At the individual-employer level: the employer’s proportionate share (percent) of the collective net pension liability, the employer’s share (amount) of the collective total pension liability, the employer’s share (amount) of the collective amount of the plan trust’s net position, the employer’s share (amount) of the collective net pension liability, the employer’s covered payroll, and the employer’s share of the collective net pension liability as a percentage of the employer’s covered payroll.
       
  3. A set of 10-year schedules—one at the collective level and one at the individual-employer level—presenting the actuarially calculated employer contribution, if one is determined; the contractually required contribution, if different; employer contributions made; the difference between the actuarially calculated contribution and actual contributions made; covered payroll; and contributions made as a percentage of covered payroll. If not otherwise disclosed, significant methods and assumptions used in determining the actuarially calculated contributions should be presented as notes to the schedule.  
For cost-sharing employers that have special funding situations, the Board tentatively agreed to propose that the same information as for cost-sharing employers with no special funding situations be presented, with the addition of the certain information in the individual-employer level schedules, as follows:
  1. A 10-year schedule of changes in the net pension liability at the collective level presenting the total pension liability and plan net position at the beginning of the period, components of the current-period change, and the ending period balances of the total pension liability and plan net position.
     
  2. A set of 10-year schedules presenting the following:

    1. At the collective level: the total pension liability, the amount of the plan trust’s net position, the net pension liability, the plan trust’s net position as a percentage of the total pension liability, covered payroll, and the net pension liability as a percentage of covered payroll
       
    2. At the individual-employer level:

      1. Amounts before the support of the other entity: the employer’s proportionate share (percent), the employer’s share (amount) of the collective total pension liability, the employer’s share (amount) of the collective amount of the plan trust’s net position, and the employer’s share (amount) of the collective net pension liability
         
      2. The reduction in the employer’s share (amount) of the net pension liability for the portion that is assumed by the other entity
         
      3. The net pension liability recognized by the employer
         
      4. The employer’s proportionate share (percent) of the net pension liability after the other entity’s support
         
      5. The employer’s covered payroll
         
      6. The employer’s recognized net pension liability as a percentage of the employer’s covered payroll.
         
  3. A set of 10-year schedules—one at the collective level and one at the individual-employer level—presenting the actuarially calculated employer contribution, if one is determined; the contractually required contribution, if different; employer contributions made, separately identifying contributions made directly by the employers, amounts contributed by nonemployer entities, and the total contributions made by employers and nonemployer entities; the difference between the actuarially calculated contribution and actual contributions made; covered payroll; and contributions made as a percentage of covered payroll. If not otherwise disclosed, significant methods and assumptions used in determining the actuarially calculated contributions should be presented as notes to the schedule.  
With regard to RSI for governmental nonemployer contributing entities that report a portion of the net pension liability of the employer(s) assumed as a result of their legal requirement to contribute to a pension plan, the Board tentatively agreed to propose that a 10-year schedule be presented that includes for each year the following, aggregated for the entity’s involvement in all such benefit arrangements: (1) the total amount of the net pension liabilities recognized by the entity as a result of pension support to employers and (2) the amount of on-behalf contributions made by the nonemployer government as support for pension benefits of others.

Regarding the entry age normal actuarial cost method, the Board tentatively affirmed its prior decision to exclude for accounting and financial reporting purposes applications of the cost method that assign future service costs in amounts that are a different percentage of pay than service costs assigned to past periods. The Board also tentatively affirmed its prior tentative decision to propose that the effects of all benefit changes be recognized by employers in pension expense in the period of the change.

On the topic of the timing of the measurement of plan net position for purposes of employer recognition of a net pension liability (asset), the Board tentatively affirmed its prior decision to propose that such measures be determined as of the employer’s year-end.

Minutes of Meeting, April 12–14, 2011


The Board discussed issues including clarifying the earlier tentative decision related to a non-employer entity’s responsibility to contribute to a cost-sharing multiple-employer defined benefit pension plan; attribution of a net pension liability and related measures for pension benefits provided through a cost-sharing defined benefit pension plan to employers and to non-employer governments that have a legal responsibility for a portion of total contributions; accounting for the role of non-employer entities that have a legal requirement to contribute to a defined benefit single-employer or agent cost-sharing employer pension plan; note disclosures and required supplementary information for governments that would be required to recognize a net pension liability for a cost-sharing pension arrangement; certain note disclosure and required supplementary information requirements for agent pension plans; and transition and effective date provisions. In addition, the Board reviewed draft Standards sections for the employer and plan Exposure Drafts.

On the topic of a non-employer entity’s responsibility to contribute to a cost-sharing multiple-employer defined benefit pension plan, the Board tentatively clarified that it views the net pension liability as originating with the cost-sharing employers. The role of the non-employer entity that has a legal responsibility for a portion of total contributions to satisfy the total liability of the employers is tentatively viewed by the Board as support or assistance to the employers that results in an assumption by the non-employer entity of a portion of each employer’s net pension liability and related measures.

With regard to the attribution of the collective cost-sharing liability and related measures to employers and to non-employer governments that have a legal responsibility for a portion of total contributions, the Board tentatively decided that the proportionate share should be based on a measure reflective of the long-term expectation of the individual entity’s contribution requirements relative to the expected total legally required contribution requirements of all entities, determined at the time of the latest actuarial valuation. In addition, the Board agreed that for each entity, the net effect of a change in its proportionate share should be calculated for accounting and financial reporting purposes as of the beginning of its fiscal year. The net effect would be accounted for as a deferred outflow (inflow), with pension expense recognized over a weighted-average period based on the expected remaining service lives of all active employees. Finally, the Board tentatively decided that any difference between the amount of a government’s actual contribution recognized by the pension plan and the proportionate share of all contributions allocated to the government in the period should be recognized as a deferred outflow (inflow), with pension expense recognized over a weighted-average period based on the expected remaining service lives of all active employees.

On the topic of note disclosures and required supplementary information for governments that recognize cost-sharing pension liabilities, the Board tentatively decided the following general information should be required: (1) the aggregate (total for all benefit arrangements) recognized net pension liabilities, pension expenses, deferred pension outflows, and deferred pension inflows; (2) general information about the plan, including descriptions of benefit provisions and the authority for establishing or amending those provisions, descriptions of employees covered by the benefit arrangement, and the availability of stand-alone plan financial reports; (3) assumptions used in measurement; (4) descriptions of changes in assumptions or plans terms; and (5) information about the basis for the determination of contributions to the plan by employees, the employer, and other contributing entities. The Board tentatively agreed to also require disclosure of information about the net pension liability and related measures associated with each cost-sharing plan for which the government recognizes a pension liability. Governments also would be required to disclose the amount of government-specific deferred outflows (inflows) attributable to (a) the net effect of the government’s current-period change in proportionate share and (b) the current-period difference between the government’s actual contributions recognized by the plan and the government’s proportionate share of collective contributions recognized by the plan in the period, the period over which those deferred outflows (inflows) will be recognized as pension expense, and the amount of prior-period individual-government deferred pension outflows (inflows) recognized as pension expense in the current period. In addition, the Board tentatively agreed that a cost-sharing employer should be required to disclose the revenue it recognized as a result of the support provided by the non-employer contributing entity, as well as the amount of net pension liability and deferred pension outflows (inflows) assumed by the non-employer contributing entity and the amount of the net pension liability and deferred pension outflows (inflows) that would have been recognized by the employer if a portion of those amounts had not been assumed by a non-employer contributing entity. The Board will continue deliberations at a future meeting of what information should be presented by cost-sharing employers and other governments in required supplementary information.

With regard to situations in which a non-employer entity has a legally enforceable responsibility to contribute to a single-employer or agent multiple-employer plan, the Board tentatively agreed that the employer(s) and the non-employer entity should account for that support in the same way that a cost-sharing employer would account for such support under the tentative decisions identified above. In addition, the Board tentatively agreed that the non-employer contributing government should follow the same disclosure requirements tentatively agreed upon related to non-employer governments’ involvement in cost-sharing arrangements. It also tentatively was decided that sole or agent employers that receive support from a non-employer entity should report in notes and required supplementary information the same information as required by sole and agent employers that do not have other-entity support. Detailed information presented in notes and required supplementary information of a sole or agent employer should be measured without the effects of the other entity’s support, with additional identification of (1) the amount of net pension liability and deferred pension outflows (inflows) assumed by the non-employer contributing entity and (2) the revenue recognized as a result of the support provided by the non-employer contributing entity. The Board will continue deliberations at a later meeting to determine what should be presented by non-employer governments in required supplementary information.

The Board also considered the results of outreach to users of agent multiple-employer pension plans financial statements on the Board’s prior tentative decision to exclude from notes and required supplementary information, aggregated measures related to the employers’ net pension liabilities and contributions. The Board tentatively affirmed its earlier tentative decision to exclude such information from requirements for agent multiple-employer plans.

On the topic of transition and effective dates, the Board tentatively decided that the provisions of the proposed Statements should be applied retroactively to the extent it is practical in employer and plan financial statements. In cases in which it is not practical, for example, as might be the case with deferral balances related to differences between actual and projected earnings on plan investments for an employer whose fiscal year-end differs from the plan’s, the employer’s retroactive application would be limited to the net pension liability. In regard to required supplementary information, the Board tentatively agreed that amounts would not be required to be presented for periods prior to implementation; however, retroactive application would be encouraged.

In regard to the effective date for employers, the Board tentatively decided the effective date should be for financial reporting periods beginning after June 15, 2012 for large, sole employers that are not involved in arrangements in which another entity would be required to report a share of the employer’s net pension liability and related measures as a result of a legally enforceable requirement to make contributions. For all other employers, the requirements of the proposed Statement would be effective for periods beginning after June 15, 2013. The Board will continue deliberations at a future meeting regarding the definition of “large” for this purpose. The Board tentatively agreed that pension plans should follow the same effective date requirements as tentatively decided for the employers.

The Board also reviewed draft Standards sections of both the employer and the pension plan Exposure Drafts and considered additional issues related to those drafts. Board members provided feedback and suggestions to the project staff related to the text of the drafts. In addition, the Board made tentative decisions related to detailed requirements for display of information in pension plan financial statements, generally agreeing to carry forward to the Exposure Draft existing requirements. The Board also discussed terminology and issues related to further alignment of the employer and plan requirements for note disclosures and required supplementary information. Preballot drafts of both Exposure Drafts are scheduled to be discussed at the Board’s May 2011 meeting.

The chairman requested that any alternative views to the Exposure Draft proposal be provided to the staff by April 22. One Board member stated at the meeting that an alternative view would be submitted.

Minutes of Teleconference, March 22, 2011

The Board discussed four topics—certain issues related to accounting for a non-employer entity’s involvement with cost-sharing arrangements, accounting issues related to an employer’s liability to a pension plan for contributions, certain disclosures by sole and agent employers regarding plan net assets, and follow-up issues related to accounting for defined contribution pension benefits.

With regard to cost-sharing employers, the Board tentatively decided that for all entities that have a non-contingent legal requirement to contribute a portion of the total assessed required contributions to a cost-sharing plan, that commitment represents an assumption by the paying government of a portion of the collective net pension liability. The Board specifically excluded from this approach entities whose requirements to contribute are contingent, for example, in circumstances in which there is a requirement to contribute amounts collected under a specific tax assessment. Further, the Board agreed that the general approach discussed in Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, which results in employers recognizing pension expense in an amount that reflects the total cost of compensation, should continue to be applied to cost-sharing employers.

On the topic of accounting issues related to an employer’s liability to a pension plan for contributions, the Board tentatively decided that employers should recognize a liability for both short-term and long-term payables to a pension plan for contributions. As part of this discussion, the Board also tentatively agreed to eliminate the term pension-related debt and to instead refer to such liabilities as long-term payables to the pension plan. In addition, the Board tentatively agreed that employers should disclose information about the short-term and long-term payables to the pension plan in notes to the financial statements. This information tentatively should include the amounts of and significant terms related to payables outstanding at the end of the period, as well as information about what gave rise to them.

With regard to note disclosures about plan assets for sole and agent employers, the Board tentatively agreed that if a plan financial report that includes disclosure about plan net assets is publicly available, either as a stand-alone financial statement or included as a fiduciary fund of another entity, and the employer provides information about how to obtain the report, the employer may refer to the plan’s financial report for disclosures about plan net assets. In this situation, the Board tentatively agreed that the employer also should be required to disclose that the components of plan net assets and changes in plan net assets have been determined on the same basis as is used in financial reporting by the plan and to include a brief summary of the plan’s basis of accounting, including the policies with respect to benefits and refunds paid, and the valuation of investments. The Board also agreed that if significant changes have occurred that would indicate that the disclosures included in the plan’s financial report generally would not reflect the facts and circumstances at the employer’s year-end, additional disclosure of the changes should be required. These additional disclosures should describe the substance and magnitude of the changes. In circumstances in which plan-level information is not included in a publicly available financial report, the Board tentatively agreed that the employer should disclose all information required by other standards about plan net assets.

Finally, concerning the topic of accounting for defined contribution benefits, the Board tentatively agreed that an employer that provides defined contribution benefits should report pension expense net of forfeitures of non-vested employer contributions that are removed from employees’ accounts. (Amounts that are reallocated to the accounts of other employees would not be considered forfeited amounts for this purpose.) In addition, the Board tentatively agreed that employers that provide defined contribution benefits should disclose (1) a brief description of the vesting and forfeiture provisions, if any, including a description of how forfeitures are used and (2) the amount of forfeitures reflected in net pension expense recognized in the period. The Board also discussed the classification of pension benefits that have both defined contribution and defined benefit characteristics and tentatively affirmed that such a benefit should be accounted for as a defined benefit.

Minutes of Meeting, March 1–3, 2011


The Board discussed three topics—issues related to accounting by cost-sharing employers, refinements to the description of the methodology that will be required for the determination of service cost, and timing and frequency of measurements reported by employers or defined benefit pension plans.

With regard to cost-sharing employers, the Board first discussed whether standards for accounting and financial reporting should be based on the view that employers in a cost-sharing plan are responsible for the collective unfunded pension obligation. The Board tentatively decided that the liability is generally the responsibility of the employers. The Board noted, however, that there are potential circumstances in which another entity has a legally enforceable responsibility for some portion of the collective unfunded pension obligation through a guarantee or requirement to contribute and that additional staff research and Board discussion would be required with regard to the assignment of the obligation in those circumstances.

In circumstances in which the employers are responsible for the collective unfunded pension obligation, the Board tentatively affirmed its preliminary view that each employer in a cost-sharing plan has a share of the collective unfunded pension obligation that meets the definition of a liability in Concepts Statement No. 4, Elements of Financial Statements, and that the employer’s share of the collective unfunded pension obligation is measurable with sufficient reliability for recognition. The Board will continue discussion of potential bases for allocation of the collective obligation to individual employers at a later meeting. With regard to measurement of the collective net pension obligation, pension expense, and deferred pension outflows (inflows) that will be allocated to individual employers, the Board tentatively agreed that the measurement and attribution approaches that tentatively have been agreed to for measuring the net pension liabilities of sole and agent employers should be used.

With regard to elements of the attribution methodology that would be required to be used to assign service cost to periods, the Board tentatively decided that an employer’s net pension liability should be required to be based on calculations of service cost made on an employee-by-employee basis, and attribution of service costs for all benefits should be made over periods beginning in the period in which the employee is hired and ending in the period in which the employee reaches the single, assumed retirement age that is applied to all employees. The Board also tentatively decided that attribution methods that calculate service cost for different periods based on different measures of the present value of projected benefits should not be permitted. Finally, the Board tentatively decided that the attribution method in the Exposure Draft should specify that differences between actual and expected experience reduce or increase the total pension liability.

On the topic of timing and frequency of pension measurements, the Board discussed issues related to both employer reporting and single-employer and agent multiple-employer plan reporting. With regard to employers, the Board tentatively affirmed its proposal in the Preliminary Views that both components of the net pension liability—the total pension liability and the measure of plan net assets—should be recognized as of the date of employers’ financial statements. It also tentatively reaffirmed that biennial comprehensive measurements should be required and more frequent measurements should be encouraged. Further, the Board tentatively agreed that comprehensive measurement need not be as of the employer or the plan’s fiscal year-end(s). Updates of the total pension liability from the comprehensive measurement date to the employer’s fiscal year-end tentatively would be permitted, as long as the comprehensive measurement used as the basis for the update is not as of a date more than 24 months prior to the employer’s fiscal year-end. If significant changes occur between the comprehensive measurement date and the employer’s fiscal year-end, professional judgment should be used to determine the extent of procedures needed to update the measurement to the employer’s fiscal year-end and should include consideration of whether a new comprehensive measurement is needed. The Board also noted that, at the employer’s fiscal year-end, valuation of investments that do not have readily determinable market values might require estimates. The Board also tentatively agreed that all information about the net pension liability that would be required to be disclosed in notes or presented in required supplementary information should be measured as of the date of the employer’s financial statements.

With regard to single-employer and cost-sharing multiple-employer defined benefit pension plans, the Board tentatively decided that information that is required to be disclosed in notes or presented in required supplementary information related to the net pension liabilities of the employer(s) should be reported as of the plan’s fiscal year-end.

In addition, the Board considered but tentatively decided not to include in the Exposure Draft (1) a more detailed proposal of update procedures than that which was included in the Preliminary Views and (2) additional proposed criteria or guidance related to applying professional judgment to determine whether a change that occurs between the comprehensive measurement date and the employer’s fiscal year-end constitutes a significant change.

Minutes of Teleconference, February 8, 2011

The Board continued its discussion of actuarial assumptions, including mortality-related assumptions and experience studies. The Board tentatively decided that detailed information about mortality adjustments and mortality improvement assumptions should not specifically be required to be disclosed. However, to the extent that such elements are significant to the measurement, they would be subject to the same disclosure requirements as other significant assumptions. With regard to experience studies, the Board tentatively agreed that the Exposure Draft should not include a minimum frequency requirement; however, the Board did agree that the date of the last experience study should be disclosed.

The Board also discussed potential limits on the application of the entry age normal attribution method and tentatively decided that the attribution method defined in the Exposure Draft should exclude the use of approaches such as ultimate/replacement entry age normal in which measurements of service costs are not individually based. The Board will continue deliberations on additional variations of the entry age normal attribution method at a later meeting.

In addition, the Board considered the coordination of tentative decisions made to date in the pension accounting and financial reporting project with other accounting and financial reporting standards related to employee benefits. The Board tentatively agreed that no changes should be made to existing guidance in Statement No. 16, Accounting for Compensated Absences, related to the classification of (1) accrued sick leave that may only be used to receive additional service time for defined pension benefits and (2) a payment to a third party to satisfy an accrued sick leave liability. The Board also tentatively agreed that no changes should be made to the current approach in Statement No. 47, Accounting for Termination Benefits, related to accounting and financial reporting for the effect of a termination benefit on (pre-) existing defined pension benefits.

The Board discussed whether a requirement should be established related to the allocation of an employer’s net pension liability among funds in the fund financial statements and between governmental and business-type activities in the government-wide statement of net assets. The Board tentatively decided that the employer Exposure Draft should not include allocation guidance of this type.

Minutes of Meeting, January 18-20, 2011


The Board discussed communication of historical actual rates of return by defined benefit plans. The Board tentatively decided to propose that defined benefit pension plans disclose in notes to the financial statements both the current-period time-weighted rate of return, net of expenses, and the current-period money-weighted rate of return, net of expenses. In addition, the Board tentatively agreed to propose that the actual annualized rates of return (time weighted and money-weighted) be presented for the current period and the nine prior periods in required supplementary information. The Board also tentatively agreed that the Exposure Draft should encourage, but not require, reporting all required years of information retroactively. The Board tentatively decided not to propose that multi-year rates of return be disclosed in notes or presented in required supplementary information in the plan financial statements.

The Board also discussed the potential development of detailed requirements related to the selection of the long-term expected rate of return and tentatively decided to propose that in addition to requiring that current actuarial standards of practice be applied in developing the long-term expected rate of return on plan investments, defined benefit pension plans be required to disclose (a) the best estimate for the long-term expected real rate of return for each major asset class, (b) information about whether the expected rates of return are presented as arithmetic or geometric means, and (c) information about how the combined long-term expected term rate of return was developed, for example, the assumed asset allocation of the portfolio.

The Board also continued its redeliberation of issues addressed in the Preliminary Views, Pension Accounting and Financial Reporting by Employers, including consideration of comments and testimony received on the Board’s proposals in that document. The Board considered the comments and testimony received on its preliminary views regarding expense recognition of changes in a sole or agent employer’s net pension liability resulting from changes in plan net assets. The Board tentatively reaffirmed its position stated in the Preliminary Views that projected earnings on plan investments, calculated using the long-term expected rate of return, should be included in the determination of pension expense in the period in which the earnings are projected to occur. The Board also reconsidered the approach to expense recognition of differences between projected and actual earnings on plan investments suggested in the Preliminary Views and tentatively decided to propose instead that differences between projected and actual earnings on plan investments be reported as deferred inflows and outflows of resources and be allocated and recognized in pension expense over a closed five-year period. The Board also tentatively agreed that employer contributions do not affect the amount of employer pension expense.

In addition, the Board considered the comments and testimony received on its preliminary views regarding expense recognition of changes in a sole or agent employer’s net pension liability resulting from changes in the total pension liability. The Board tentatively decided to revise its view and to propose that the effect of a change of plan terms on the total pension liability be recognized as expense in the period of the change, regardless of the active or inactive classification of the employee. The Board also reaffirmed its preliminary view that changes in the total pension liability resulting from differences between expected and actual experience with regard to economic or demographic factors or assumption changes regarding the expected future behavior of economic and demographic factors should be deferred and recognized as expense over a period representative of employees’ expected remaining service lives. To the extent that such changes relate to past service of inactive, including retired, employees, the Board reaffirmed its view that such changes should be recognized as pension expense immediately in the period of change. To the extent that such changes relate to past periods of service of active employees, the Board reaffirmed its preliminary view that expense should be recognized using a systematic and rational approach over a closed period. In addition, the Board tentatively agreed to propose that the period be an average expected remaining service life of the employees with which the change is associated, with weighting to approximate the result that would be obtained if such changes were recognized over each active employee’s service life. In addition, the Board reaffirmed its preliminary view that the service-cost component of pension expense should be the amount attributed to the current period by the entry age actuarial cost method and that interest on the beginning total pension liability should be recognized as pension expense each period.

Minutes of Teleconference, December 29, 2010

The Board considered a paper summarizing the results of project-staff outreach related to the relative significance of various actuarial assumptions used in the measurement of defined pension benefits for accounting and financial reporting purposes. After reviewing the feedback received from members of the actuarial community with whom the project staff consulted on this issue, the Board considered whether to establish specific guidance in the Exposure Draft related to the selection of assumptions for accounting and financial reporting purposes. The Board tentatively decided to include in the Exposure Draft a requirement that the selection of all actuarial assumptions be made in accordance with Actuarial Standards of Practice. With regard to specific assumptions, the Board tentatively agreed to consider at a later meeting whether to include additional note disclosures about mortality assumptions. The Board also asked the project staff to continue to discuss with members of the actuarial community issues related to the frequency of the reevaluation of actuarial assumptions used in calculations for accounting and financial reporting purposes and tentatively agreed to consider these issues further at a later meeting after additional outreach has been conducted.

The Board also discussed accounting for two types of insurance arrangements within the context of defined benefit pension arrangements. The Board first discussed contracts with an insurance company under which the related payments to the insurer are currently used to purchase immediate or deferred annuities for individual members—also referred to as allocated insurance contracts. The Board tentatively agreed that allocated insurance contracts, including those with features that give the plan a right to receive future dividends from the insurer, should be excluded from plan assets and that the employer’s total pension liability should exclude benefit payments to be provided through such contracts if (1) the contract irrevocably transfers to the insurer the responsibility for providing the benefits and (2) all required payment(s) to acquire the contracts have been made and the likelihood is remote that the employer or plan will be required to make future payments to satisfy the benefit payments covered by the contract. The Board also tentatively agreed to continue the requirements of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, with regard to defined benefit plan accounting for allocated insurance contracts. Specifically, it tentatively agreed on the following:
  • Amounts paid by the plan to an insurance company pursuant to a contract that is excluded from plan assets, including purchases of annuities with amounts allocated from existing investments with the insurance company, should be included in amounts recognized as benefits paid.
     
  • Benefits paid should not include payments made by an insurance company in accordance with a contract that is excluded from plan assets.
     
  • Dividends from allocated insurance contracts should be recognized as a reduction of benefit payments recognized in the period.
     
  • Benefits payable from contracts excluded from plan assets for which payments to the insurance company have been made should be excluded from plan liabilities.
In addition, the Board tentatively decided that employers and defined benefit pension plans should be required to disclose the following information about allocated insurance contracts that are excluded from plan assets and about benefits that are excluded from the employer’s total liability:

  • The amount in the current period attributable to the purchase of allocated insurance contracts in (1) the change in the employer’s total pension liability and (2) benefit payments recognized by the plan
     
  • A brief description of the benefits for which allocated insurance contracts were purchased in the current period
     
  • The fact that the obligation for the payment of benefits covered by the allocated insurance contracts has been effectively transferred from the employer to one or more insurance companies
     
  • Whether the employer retains an obligation for benefits covered by the allocated insurance contracts in the event of the insurance company’s insolvency.
The Board also considered accounting and financial reporting issues related to an employer that provides defined pension benefits by means of a financing arrangement whereby it accumulates funds with an insurance company, while employees are in active service, in return for which the insurance company unconditionally undertakes a legal obligation to pay the pension benefits of those employees or their beneficiaries, as defined in the employer’s plan. These arrangements are referred to in Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as insured plans. The Board tentatively decided that if the probability is remote that the employer will be obligated to transfer additional assets to the insurer in the future to support the payment of the benefit obligation, an employer that provides defined pension benefits through such an arrangement should do the following:

  • Exclude from its total pension liability benefits to be provided through the insured plan
     
  • Recognize pension expense equal to the contributions or premiums required in accordance with their agreements with the insurance company for such benefits
     
  • Disclose the following in the notes to its financial statements:

    • The current-year pension expense/expenditure associated with premiums for the insured plan
       
    • A brief description of the insured plan, including the benefit provisions and the authority under which benefit provisions are established or may be amended
       
    • The fact that the obligation for the payment of benefits has been effectively transferred from the employer to one or more insurance companies
       
    • Whether the employer retains an obligation for benefits in the event of the insurance company’s insolvency.
Minutes of Meeting, December 7-9, 2010

The Board began its redeliberations of issues addressed in the Preliminary Views, Pension Accounting and Financial Reporting by Employers, including consideration of comments and testimony received on the Board’s proposals in that document. The Board considered issues related to the recognition and measurement of a sole or agent employer’s obligation for pension benefits. Issues relating to cost-sharing employers are scheduled to be deliberated at a later meeting.

The Board discussed concerns raised by some respondents to the Preliminary Views related to the proposed elimination of a pension accounting and financial reporting model based on measures consistent with those used for funding purposes and the potential displacement of information about pension funding. The Board tentatively reaffirmed its view that measures for accounting and financial reporting purposes should not be limited to those used to manage and measure pension funding.

In addition, the Board considered the comments and testimony received on its preliminary views in the following areas and made tentative decisions as discussed below:
 
  • Responsibility for the portion of the obligation for defined pension benefits in excess of the plan net assets available for benefits. The Board tentatively reaffirmed its position stated in the Preliminary Views that defined pension benefits originate from exchanges between the employer and employees and are part of the total compensation for employee services. The Board also tentatively reaffirmed its view that an employer is primarily responsible for the unfunded pension obligation and secondarily responsible for the portion of the total pension obligation for which plan net assets have been accumulated in trust. The Board also tentatively decided to clarify its intent with regard to usage of the terms primary responsibility and secondary responsibility, and variants of those terms, through the drafting process.
     
  • Liability recognition by a sole or agent employer of the unfunded pension obligation to employees. The Board tentatively reaffirmed its preliminary view that the unfunded pension obligation of a sole or agent employer meets the definition of a liability in Concepts Statement No. 4, Elements of Financial Statements, and that the obligation (termed the net pension liability) is measurable with sufficient reliability for recognition. The Board also tentatively decided that if the measure of plan net assets exceeds the employer’s total pension liability, the excess should be reported as an asset by the employer. In addition, unpaid contributions pursuant to contractual or statutory provisions should be reported as a liability (as would any other account payable) separate from the net pension liability.
     
  • Certain assumptions used in the projection of benefit payments. The Board tentatively reaffirmed its view that the effects of automatic COLAs should be included in the projection of benefit payments. The Board also tentatively decided that the projection of benefit payments should include the effects of projected future ad hoc COLAs only to the extent that such COLAs are considered to be substantively automatic. With regard to criteria to determine whether ad hoc COLAs are not substantively different from automatic COLAs for purposes of projecting future benefit payments for accounting and financial reporting purposes, the Board tentatively decided that no specific criteria should be included in the Exposure Draft on this issue. Instead, the Board tentatively agreed that the following should be included as examples of possible considerations in making a judgment regarding the substance of the ad hoc COLAs:

    • The historical pattern of granting the COLAs
       
    • The consistency in the amounts of the COLAs or in the amounts of the COLAs relative to,
       
    • Whether there is evidence to conclude that COLAs might not continue to be granted in the future despite what might otherwise be a pattern that would indicate such COLAs are substantively automatic.
The Board also tentatively reaffirmed that the projection of pension benefit payments should include both the effects of projected future salary increases and the effects of future service credits when those items are considered in the pension benefit formula. In addition, the Board tentatively agreed that its decisions regarding automatic and ad hoc COLAs should be applied to all other types of retroactive benefit changes for purposes of projecting pension benefit payments for accounting and financial reporting purposes. The Board also discussed whether consideration should be given to establishing more detailed requirements related to the selection of assumptions used in the measurement of the net pension liability and will continue discussion of that issue at a later meeting.

  • Discount rate. The Board tentatively reaffirmed its position that the discount rate should be a single rate that produces a present value of total projected benefit payments equivalent to that obtained by discounting projected benefit payments using (1) the long-term expected rate of return on plan investments to the extent that current and expected future plan net assets available for pension benefits are projected to be sufficient to make benefit payments and (2) a high-quality municipal bond index rate for those payments that are projected to be made beyond the point at which plan net assets available for pension benefits are projected to be fully depleted. With regard to the long-term expected rate of return, the Board discussed whether consideration should be given to establishing more detailed requirements related to the selection of the rate and will continue discussion of that issue at a later meeting. With regard to the high-quality municipal bond index rate, the Board tentatively agreed that the rate should be a tax-exempt rate based on a 30-year AA or higher bond index rate.
The Board also tentatively decided to include clarifying language in the Exposure Draft to explain that the projection of future employer contributions for purposes of determining a blended discount rate should include all employer contributions intended to fund benefits of current employees; however, the projection should not include contributions intended to fund the service costs of future employees or the contributions of future employees. In addition, the Board tentatively agreed that for purposes of determining the blended discount rate, if employer contributions to the plan are expected to be held for a short time such that there would be little or no opportunity to invest the assets (for example, if contributions are made on a pay-as-you-go basis), projected benefit payments that are expected to be paid by those contributions should be discounted at the high-quality municipal bond index rate.

  • Attribution method. The Board tentatively reaffirmed its view that a single method—the entry age actuarial cost method applied on a level-percentage-of-payroll basis—should be proposed in the Exposure Draft. The Board also tentatively decided that the Exposure Draft should include a definition of the attribution methodology.
     
  • Measurement of plan net assets. The Board tentatively reaffirmed its preliminary view that the plan net assets held in trust for pension benefits component of the employer’s net pension liability should be measured in the same way that it is measured in the statement of plan net assets, including measurement of investments at fair value.
Minutes of Teleconference, November 17, 2010

The Board reconsidered a previous tentative decision related to the reporting of information about the net pension liability of the employer(s) in the financial reports of single-employer and cost-sharing multiple-employer defined benefit pension plans. Previously, the Board tentatively had decided to require that those plans present as required supplementary information 10-year schedules of information about the net pension liabilities of the employer(s) and changes in those liabilities. At the November teleconference meeting, the Board reconsidered the definitions of notes and required supplementary information in Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements, and revised its earlier tentative decision by tentatively agreeing to also require that information about the employer(s) current-period net pension liability be disclosed in the notes to the plan’s financial statements. The disclosure tentatively would require presentation of the total pension liability of the employer(s), the amount of plan net assets held in trust for pension benefits, the net pension liability of the employer(s), and the ratio of plan net assets held in trust for pension benefits to the total pension liability of the employer(s). As a result of this tentative decision, information about assumptions used in the calculation of the current-period net pension liability of the employer(s) will be required to be presented in notes to the plan financial statements.

Minutes of Meeting, October 25, 26, and 28, 2010

The Board discussed issues related to note disclosures and required supplementary information in financial reports of defined benefit pension plans. After discussion, the Board tentatively agreed to propose that a defined benefit plan be required to include the following information in notes to its financial statements:
 
  • In the summary of significant accounting policies—a brief description of how the fair value of investments is determined, including the methods and significant assumptions used to estimate the fair value of investments if that fair value is based on other than quoted market prices
     
  • General information, including:

    • The name of the plan through which benefits are provided, identification of the public employee retirement system or other entity that administers the plan, identification of the plan as a single-employer, agent multiple-employer, or cost-sharing multiple-employer defined benefit pension plan, and the number of participating employers and other contributing entities.
       
    • Information regarding the pension board and its composition (for example, the numbers of trustees by source of selection or the types of constituency or credentials applicable to selection).
       
    • The authority under which benefit provisions are established or may be amended and the types of benefits administered by the pension plan. If the pension plan has the authority to establish or amend benefit provisions, the plan should also provide a brief description of the benefit provisions, including the key elements of the benefit formula(s).
       
    • Classes of employees covered (for example, general employees and public safety employees) and the number of employees covered by the plan, separately identifying numbers of the following: (1) retired employees and their beneficiaries currently receiving benefits, (2) inactive employees entitled to but not yet receiving benefits, and (3) active employees. If the plan is closed to new entrants, that fact should be disclosed.
       
    • A description of the plan’s investment policies, including information about the Procedures and authority for establishing and amending investment policy, the plan’s policies pertaining to asset allocation, and a description of significant investment policy changes during the period.
       
    • Identification of concentrations of investments (of every type, other than those issued or guaranteed by the U.S. government) in any one organization that represent 5 percent or more of plan net assets.
       
    • The terms of any long-term contracts between the employer and the plan for contributions to the plan by the employer and the balances outstanding on any such long-term contracts at the plan’s year-end.
       
    • In circumstances in which a pension plan has a policy of setting aside, for purposes such as benefit increases or reduced employer contributions, a portion of the plan net assets that otherwise would be available for existing pension benefits or plan administration, information about the reserves, including a description of the policy related to such reserves, the authority under which the policy was established and may be amended, the purpose(s) for and condition(s) under which the reserve is required or permitted to be used, and the balance of the reserve.
  • Information about contributions, including:

    • The authority under which contribution requirements of the employer, employee, and other contributing entities are established or may be amended and the current-period contribution rates of those entities. If the pension plan has the authority to establish or amend contribution requirements, the plan also should provide information about the basis for determination of actual contributions to the plan (for example, if contributions are determined by statute, by contract, on an actuarial basis, or in some other manner). If actual contributions are determined on an actuarial basis, the plan also should disclose the significant methods and assumptions used in the calculation of current-period contributions.
       
    • If not separately displayed, the amount of contributions by the employer from its own sources and contributions made on behalf of the employer by another entity, if employer contributions to the plan include more than one contributor.
The Board also tentatively agreed to propose that a defined benefit pension plan disclose in notes to its financial statements information regarding the actual rate of return on plan investments. Additional discussion of potential information that would be proposed for inclusion in such a disclosure is scheduled to be deliberated at a later meeting.

With regard to presentation of required supplementary information, the Board tentatively agreed that a single-employer or cost-sharing multiple-employer defined benefit pension plan should present the following as required supplementary information:
 
  • A 10-year schedule of changes in the net pension liability of the employer(s), that for each year separately presents:

    1. The beginning and ending balances of plan net assets held in trust for pension benefits and the total pension liability of the employer(s)
       
    2. The effects, if any, of the following on plan net assets held in trust for pension benefits and on the total pension liability of the employer(s):

      1. Service cost  
         
      2. Interest  
         
      3. Benefit changes related to past services  
         
      4. Experience losses (gains)  
         
      5. Changes in assumptions  
         
      6. Contributions—employer (direct)  
         
      7. Contributions—employer (other entities on behalf of the employer)
         
      8. Contributions—employees  
         
      9. Net investment income  
         
      10. Refunds of contributions  
         
      11. Benefits paid  
         
      12. Plan administrative expenses  
         
      13. Other changes, separately identified if individually significant
         
    3. The ending net pension liability of the employer(s)
       
    4. Additional information in a note to the required supplementary information (if not otherwise disclosed in the plan’s financial statements), about significant assumptions used to measure pension benefit information, including:

      1. Assumptions in respect of salary, inflation, postemployment benefit increases, and the discount rate. With regard to the discount rate, the plan also should provide the following:

        1. Assumptions made about contributions of the employer and of employees and about other projected cash flows into and out of the plan  
        2. The long-term expected rate of return on plan investments, a description of the way in which the long-term expected rate of return on plan investments was determined, and the periods of projected benefit payments to which the rate was applied  
        3. If applicable, the index rate, the reasons for selection of that rate (if the Board does not decide to specify the index), and the periods of projected benefit payments to which the rate was applied
           
      2. The date(s) of experience studies and tables on which significant assumptions are based
         
      3. The rates applied, if different rates are contemplated for different periods.
         
  • A 10-year schedule presenting for each year (1) the total pension liability of the employer(s), (2) the amount of plan net assets held in trust for pension benefits, (3) the net pension liability of the employer(s), (4) the ratio of plan net assets held in trust for pension benefits to the total pension liability of the employer(s), (5) covered payroll of the employer(s), and (6) the net pension liability of the employer(s) as a percentage of covered payroll of the employer(s).
     
  • A 10-year schedule presenting for each year (1) the actuarially calculated employer contributions, if determined, (2) employer contributions made, (3) the difference between the actuarially calculated contribution and contributions made, (4) covered payroll of the employer(s), and (5) employer contributions made as a percentage of covered payroll of the employer(s). In addition, cost-sharing multiple-employer plans should present for each year the contractually required contributions of the employers if different from the actuarially calculated contributions. If not otherwise disclosed, significant methods and assumptions used in determining the actuarially calculated contributions should be presented as notes to the schedule.

With regard to agent multiple-employer plans, the Board tentatively agreed to propose that those plans not be required to present the schedules of required supplementary information discussed above in relation to single-employer and cost-sharing multiple-employer defined benefit pension plans.

In addition, the Board also tentatively decided to revisit at a later meeting its prior tentative decision (August 2010) related to the communication method (notes or required supplementary information) that should be proposed for use in the financial reports of defined benefit pension plans to provide information about the net pension liability(ies) of the participating employer(s).

Minutes of Teleconference, October 5, 2010

The Board discussed accounting and financial reporting issues relating to defined contribution pension plans. The Board tentatively decided to revise the current definition of a defined contribution plan to clarify that in such an arrangement, what is defined by the terms of the plan is the amount that is attributed to an employee’s services in a period, notwithstanding variations that may exist with regard to the occurrence or timing of actual payments into the employee’s individual account. The Board also discussed the classification for accounting and financial reporting purposes of a pension plan that has characteristics of both a defined benefit plan and a defined contribution plan. The Board tentatively agreed to continue deliberations on this issue at a later meeting, pending a broader discussion of the definition of the term pension plan.

In addition, the Board deliberated on accounting and financial reporting by the employers that provide defined contribution pensions. The Board considered employer recognition of expenditure/expense and liabilities and specifically discussed recognition in situations in which vesting requirements exist. The Board tentatively decided that expense and liability recognition generally should be based on amounts defined by the terms of the plan as attributed to employees’ services in a period, notwithstanding variations that may exist with regard to the occurrence or timing of actual payments into an employee’s individual account. However, the Board will discuss at a future meeting whether specific requirements should be established with respect to accounting for forfeitures, such as those resulting from terminations of nonvested employees. The Board also tentatively decided to require employers to disclose the following in notes to the financial statements for each defined contribution plan in which it participates:

  • The name of the plan, identification of the public employee retirement system or other entity that administers the plan, and identification of the plan as a defined contribution plan
     
  • A brief description of benefit provisions and the authority under which they are established or may be amended
     
  • The rates (in dollars or as a percentage of salary) used to determine amounts that are attributed to employees’ periods of service, including the rates for employees, the employer, and for other contributing entities, and the authority under which those rates are established or may be amended
     
  • The total dollar amounts attributed to employees’ services in the period, including amounts from (a) plan members and (b) the employer.

With respect to accounting and financial reporting guidance by defined contribution plans, the Board tentatively decided that the plan Exposure Draft should include a reference to guidance in Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, regarding the use of pension and other employee benefit trust funds to report defined contribution pension plans. The Board also tentatively decided that defined contribution plans should be required to disclose a brief description of the plan, including (1) identification of the plan as a defined contribution plan, (2) information about classes of employees covered (for example, general employees, public safety employees), the total current membership, and the number of participating employers and other contributing entities, and (3) the authority under which the plan is established or may be amended. In addition, the Board tentatively agreed that a defined contribution plan should disclose the fair value of plan investments, if plan investments are not reported at fair value in the statement of plan net assets.

Minutes of Meeting, September 14-16, 2010

The Board began deliberations about information related to pensions that employers should be required to include as note disclosures or as required supplementary information.

The Board tentatively agreed that a sole or agent employer should be required to include the following in notes to its financial statements:

  • Total (aggregate for all plans) net pension liabilities, pension expenses, deferred pension outflows, and deferred pension inflows, if those amounts are not separately displayed in the financial statements
     
  • For each defined benefit pension plan in which the employer participates:
     
    1. General information
       
      1. The name of the plan through which benefits are provided, identification of the public employee retirement system or other entity that administers the plan, and identification of the plan as a single-employer, agent multiple-employer, or cost-sharing multiple-employer defined benefit pension plan
         
      2. A brief description of the benefit provisions, including the types of benefits, the key elements of the benefit formula(s), and the authority under which benefit provisions are established or may be amended
         
      3. The number of employees covered by the plan, separately identifying numbers of the following: (1) retired employees and their beneficiaries currently receiving benefits, (2) inactive employees entitled to but not yet receiving benefits, and (3) active employees.
         
      4. Whether the pension plan issues a stand-alone financial report, or is included in the report of a public employee retirement system or another entity, and, if so, how to obtain the report.
         
    2. Assumptions used in measurement
       
      1. Significant assumptions used to measure pension benefit information, including assumptions in respect of salary, inflation, postemployment benefit increases, and the discount rate. With regard to discount rate, disclosures should include:
         
        1. Assumptions made about contributions of the employer and of employees and about other projected cash flows into and out of the plan
        2. The long-term expected rate of return on plan investments, a description of the way in which the long-term expected rate of return on plan investments was determined, and the periods of projected benefit payments to which the rate was applied
        3. If applicable, the index rate, the reasons for selection of that rate (if the Board does not decide to specify the index), and the periods of projected benefit payments to which the rate was applied.
           
      2. The date(s) of experience studies and tables on which significant assumptions are based
         
      3. Different rates, if contemplated for different periods.
         
    3. Changes in the net pension liability
       
      1. For the current period, a schedule of changes in the net pension liability that separately discloses (a) the beginning and ending balances of the total pension liability, plan net assets held in trust for pension benefits, and the net pension liability and (b) the effects of the following on those items during the period:
         
        1. Service cost
        2. Interest
        3. Benefit changes related to past services
        4. Experience losses (gains)
        5. Changes in assumptions
        6. Contributions—employer (direct)
        7. Contributions—employer (other entities on behalf of the employer)
        8. Contributions—employees
        9. Net investment income
        10. Refunds of contributions
        11. Benefits paid
        12. Other changes, separately identified if individually significant
           
      2. A brief description of changes of assumptions that affect measurement of the total pension liability.
         
      3. A brief description of changes of plan terms that affect the amount of benefits associated with employee services in past periods.
         
      4. The basis for determination of actual employer contributions to the plan (the employer’s contribution policy), including identification of the authority under which employer contribution requirements are established or may be amended. If employer contributions to the plan include more than one contributor, disclosure of contributions by the employer from its own sources and contributions made on behalf of the employer by another entity.
         
      5. The basis for determination of employee contributions to the plan, including identification of the authority under which employee contribution requirements are established or may
         
    4. Pension expense
       
      1. Pension expense with separate identification of the following components:
         
        1. Service cost
        2. Interest on beginning total pension liability
        3. Current-period benefit changes
        4. Current-period experience losses (gains)
        5. Current-period changes in assumptions
        6. Employee contributions
        7. Expected earnings on plan investments
        8. Differences between actual and expected investment returns not qualified for deferral
        9. Amortization of beginning deferred pension inflows
        10. Amortization of beginning deferred pension outflows
        11. Other, with separate display by type of changes if significant.
           
      2. The amortization period or periods for different types of changes in the net pension liability that occurred in the current period.
         
    5. Deferred pension outflows (inflows)

      1. Separate reconciliations of beginning and ending balances of (a) deferred pension outflows and (b) deferred pension inflows, each with separate identification of the following categories of changes:
         
        1. Current-period benefit changes
        2. Current-period experience gains (losses)
        3. Current-period changes of assumptions
        4. Earnings on plan investments above (below) expectation
        5. Amortization of beginning deferred pension inflows (outflows).

In addition, the Board tentatively agreed that a sole or agent employer should present the following in required supplementary information for each plan in which it participates:

  • A 10-year schedule of changes in the net pension liability, presenting for each year the information noted in the required disclosure of components of the current-period change in the net pension liability in 3.a, above.
     
  • A 10-year schedule presenting for each year (1) the total pension liability, (2) the amount of plan net assets held in trust, (3) the net pension liability, (4) plan net assets held in trust as a percentage of the total pension liability, (5) covered payroll, and (6) the net pension liability as a percentage of covered payroll.
     
  • A 10-year schedule presenting for each year (1) the actuarially calculated employer contribution, if one is determined, (2) employer contributions made, (3) the difference between the actuarially calculated contribution and contributions made, and (4) contributions made as a percentage of covered payroll. If not otherwise disclosed, significant methods and assumptions used in determining the actuarially calculated contributions should be presented as notes to the schedule.

The Board considered but tentatively agreed not to require information about the sensitivity of recognized amounts to changes in assumptions used in measurement as a note disclosure or as required supplementary information. The Board also considered what information an employer should be required to disclose about plan net assets and agreed to defer a tentative decision on this issue until after the Board has discussed potential pension plan note disclosure requirements. In addition, the Board tentatively agreed to defer deliberation of potential note disclosures and required supplementary information for cost-sharing employers until a later meeting.

Minutes of Teleconference, August 27, 2010

The Board discussed certain issues related to financial-statement recognition of assets by defined benefit pension plans. It considered provisions of Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and made the following tentative decisions:

  • Receivables should not be recognized solely based on evidence of a formal commitment.
     
  • Requirements related to recognition of long-term receivables should be carried forward from Statement 25 to the plan Exposure Draft.
     
  • Requirements related to recognition of investments, including recognition at fair value and the definition and related discussion of fair value should be carried forward from Statement 25 to the plan Exposure Draft.
     
  • The requirement to record investment transactions on a trade-date basis should be carried forward from Statement 25 to the plan Exposure Draft if general guidance related to the use of trade-date basis is not issued in the potential project on fair value reporting prior to issuance of the plan Exposure Draft.
     
  • The plan Exposure Draft should exclude specific discussion of capital asset reporting.

Minutes of Meeting, August 3-5, 2010

The Board discussed whether and how information about changes in an employer’s net pension liability should be reported and tentatively decided that such information should be reported as a note disclosure in the financial reports of employers and as required supplementary information in the financial reports of defined benefit pension plans. Details of the presentations are scheduled to be discussed by the Board at a later meeting.

The Board also discussed the general approach that should be taken in an Exposure Draft on defined benefit pension plan accounting and financial reporting. It tentatively was decided that a plan Exposure Draft generally should not repeat requirements for which guidance is provided in other literature.

Minutes of Teleconference, July 15, 2010

The Board began deliberation of issues related to pension plan accounting and financial reporting. The Board’s discussion focused on benefit liability recognition by defined benefit pension plans. After considering the alternatives presented in the staff paper, the Board tentatively decided that such plans should recognize a liability for pension benefits to the extent that the benefits are currently due and payable.

Minutes of Teleconference, June 1, 2010

The Board discussed issues related to potential clarifications of prior tentative decisions. During this discussion, the Board affirmed its earlier tentative decision regarding the use of individual-member expected service life to attribute service cost to periods for purposes of calculating the total pension liability. In addition, the Board considered cost–benefit issues related to its prior tentative decision that the effects of changes in the total pension liability resulting from the following types of events should be recognized as pension expense over the expected remaining service life, if any, of individual employees:

  • Differences between expected and actual experience with regard to economic and demographic factors affecting measurement of the total pension liability
  • Changes of assumptions regarding the expected future behavior of economic and demographic factors affecting measurement of the total pension liability
  • Changes of plan terms that affect the amount of pension benefits associated with employee services in past periods.

After discussion that addressed concerns about ongoing costs of application and cost-benefit issues, the Board tentatively decided to modify its prior tentative decision. The Board tentatively agreed that to the extent that changes in the total pension liability relate to past periods of service of active plan employees, the aggregate effect of such changes should be amortized over the average of expected remaining service lives of active employees affected by the change, with weighting to approximate the result that would be obtained if such changes were amortized individually for each active employee. To the extent that these types of changes relate to past periods of service of inactive (including retired) employees, the Board reaffirmed its tentative decision that the aggregate effect of such changes should be recognized as pension expense immediately in the period of the changes.

The Board also discussed issues related to the projection of cash flows for purposes of determining the discount rate or rates to be used in the calculation of the present value of future benefit payments. The Board tentatively decided to include clarifying language in the Preliminary Views to explain that, when projecting employer contributions to a plan, factors such as the employer’s stated contribution policy and recent contribution pattern should be considered. The Board also tentatively reaffirmed its view that the projection of plan cash outflows and inflows for purposes of determining the discount rate or rates to be applied should include assumptions regarding the projected amounts of future employer contributions to the plan to the extent that they relate to providing assets for the payment of benefits to current (active and retired) employees. In addition, the Board tentatively agreed to clarify in the Preliminary Views that projected cash flows should consider sources and uses such as future contributions from sources other than the employer (including from current employees), earnings on plan net assets available for pension benefits, and administrative expenses not included in projected returns.

The Board also tentatively agreed to clarify in the Preliminary Views that the discount rate should be the single rate that, when applied to projected benefit payments, results in a present value of those payments equivalent to the sum of (1) the present value of projected benefits expected to be paid from current and expected future plan net assets, discounted at the long-term expected rate of return on plan investments, and (2) the present value of projected benefit payments that are expected to be made after plan net assets are projected to be fully depleted, discounted using a high-quality municipal bond index rate.

Finally, the Board reviewed the ballot draft of the Preliminary Views, Pension Accounting and Financial Reporting by Employers, which includes the effects of the tentative decisions described above, and a ballot draft of the Plain-Language Supplement to the Preliminary Views. After offering further clarifying suggestions for changes to each of the documents, the Board voted unanimously to approve the issuance of the documents for public comment.

Minutes of Meeting, May 11-13, 2010


The Board discussed issues related to application of a corridor method to the recognition of changes in pension investments. During the February 2010 meeting, the Board tentatively decided that recognition of pension investment earnings above or below the expected long-term rate of return should be deferred so long as the net cumulative amount of deferred outflow or deferred inflow remains within 15 percent of the reported value of plan net assets. In addition, the Board tentatively decided that if the net cumulative deferred balance at the end of a financial reporting period falls outside the corridor, the amount outside the corridor should reduce or increase pension expense in that period. At the May meeting, the Board tentatively clarified that the corridor method should be applied to changes in plan investments, rather than more broadly to changes in all plan net assets. The Board also discussed whether the deferral corridor should be centered on the fair value of plan investments or on the projected value of plan investments. On this issue, the Board tentatively clarified that the corridor should be based on the fair value of plan investments.

Further, the Board tentatively decided that changes in an employer’s net pension liability resulting from changes in plan net assets other than changes in plan investments should reduce or increase pension expense in the period in which they occur.

The Board also reviewed a preballot draft of the Preliminary Views, Pension Accounting and Financial Reporting by Employers. The Board provided suggestions to clarify the document and recommended certain changes to its content, including the incorporation of additional questions on which respondents will be asked to comment. In addition, it was tentatively decided that the Preliminary Views will not present a Board position regarding whether to use a taxable or tax-exempt high-quality municipal bond index rate for purposes of discounting projected benefit payments, if any, beyond the point at which plan net assets available for pension benefits are projected to be fully depleted. That issue will be discussed further by the Board subsequent to issuance of the Preliminary Views.

The Board also discussed a preballot draft of a plain-language supplement to its Preliminary Views. The Board offered clarifying suggestions on the plain-language supplement and recommendations regarding its content, including changes to reflect the Board’s tentative decisions at this meeting.

In addition, the project staff presented the Board with a summary of an early retiree reinsurance program provided for in the Patient Protection and Affordable Care Act of 2010. The summary was provided as background information for a proposed question on this topic to be considered by the Board with other materials for the Comprehensive Implementation Guide update at the June 2010 meeting. No tentative decisions were requested regarding this issue.

Minutes of Teleconference, April 20, 2010

The Board continued its discussion of pension accounting and financial reporting issues associated with employers participating in cost-sharing multiple-employer pension plans. Specifically, the Board reconsidered its prior tentative decisions at the March 2010 teleconference regarding (1) the selection of a basis for proportionate allocation of cost-sharing employers' collective net pension liability, pension expense, and deferred pension outflows (inflows) to individual employers and (2) financial statement recognition of the effects of a change in an employer's proportionate share from period to period. The Board tentatively decided not to present tentative decisions on these two issues in the Preliminary Views but, rather, to discuss in the Preliminary Views the effects of a change in proportionate share from period to period, including the need to adjust or account for the effects of having applied a different share in the preceding period, and to solicit suggestions from constituents regarding the basis that should be adopted for determining each employer's proportionate share of the collective net pension liability.

The Board also agreed to have additional discussions about certain details of prior tentative decisions related to (a) the establishment of a corridor for purposes of recognizing as expense differences between actual and expected returns on plan net assets available for pension benefits and (b) the selection of an amortization period for purposes of recognizing expense arising from changes in an employer's total liability due to changes in assumptions, changes in benefits, or differences between actual and expected experience with regard to demographic and economic factors. Members of the Board also expressed an interest in discussing further potential clarification of the definition of cost-sharing pension plans.

Minutes of Meeting, March 29-31, 2010

The Board discussed additional issues raised as a result of its tentative decisions at the February 2010 meeting regarding the financial-reporting periods to which employee service cost and certain other components of pension cost should be attributed and whether the amortization period selected, for those components to which one applies, should be a specified period or a maximum period. The Board also deliberated on issues related to the frequency and timing of pension measurements by employers. In addition, the Board reviewed and provided suggestions on the initial draft of the Preliminary Views, Pension Accounting and Financial Reporting by Employers.

At the February 2010 meeting, the Board had expressed interest in the possibility of harmonizing its tentative decisions regarding (1) the financial-reporting periods for attribution of employee service cost and (2) the amortization period for recognition of the following types of changes in the pension liability as expense:

  • Differences between assumed and actual experience with regard to demographic and economic factors affecting the measurement of the employer’s pension liability
     
  • The effects of changes of demographic and economic assumptions about the future behavior of those factors
     
  • The effects of benefit changes that are applied retroactively to past periods of service of plan members.
Previously, the Board had tentatively decided that (1) employee service cost should be attributed to expense over the periods in which an individual employee’s service or salary level is expected to have an incremental effect on the amount of pension benefits and (2) the latter types of changes should be allocated over an individual employee’s expected remaining service life. At this meeting, the Board tentatively decided that all of the preceding should be recognized as components of pension expense over employees’ remaining service lives to provide consistent recognition guidance.

The Board also clarified that the attribution period tentatively decided upon—the remaining service lives of individual employees—establishes a requirement to apply a defined, or specified, period, rather than a maximum period.

After discussion of issues and alternatives with regard to the frequency and timing of pension measurements for employer accounting and financial-reporting purposes, the Board tentatively agreed that an employer should report its net pension liability—that is, both the liability and the plan-net assets components of the net pension liability—measured as of its fiscal year-end.

With regard to measurement of the liability component of the net pension liability, the Board tentatively agreed to the following additional requirements:
 
  • A full measurement of the liability component should be made at least every other year (biennially).
     
  • A full measurement of the liability component need not be as of an employer’s fiscal year-end; however, the full measurement used as the basis for determination of an employer’s net pension liability should be as of a date no more than 24 months prior to the employer’s fiscal year-end.
     
  • If a full measurement of the liability component is not made as of the employer’s fiscal year-end, it should be updated to that date. Updated measures should reflect the effects of all significant changes since the most recent full-measurement date. If conditions between the two dates were relatively stable, only a few adjustments (such as changes in the net pension liability for service cost and for accrual of interest and payments of benefits since the last measurement date) may be sufficient. However, if (1) benefit changes that were not anticipated in the previous full measurement occurred or (2) there were other changes that if fully measured would significantly affect the employer’s recognized net pension liability, pension expense, or deferred pension account balances, additional procedures may be necessary to reflect the effects of those events or other transactions. Professional judgment should be applied to determine the additional procedures required to reflect the effects of such changes. Determination of the procedures needed in the particular facts and circumstances should include consideration of whether a new full measurement should be made.
In addition to the preceding tentative decisions, the Board reviewed the first draft of the Preliminary Views and provided comments and suggestions regarding the content of the document, including the following:

  • Inclusion of an additional chapter regarding tentative decisions reached during the March meeting about the timing and frequency of measurements, described above.
     
  • Revised discussion of the objectives and background of the Preliminary Views, with additional discussion of some of the primary considerations affecting the Board’s tentative decisions.
     
  • Enhanced or clarified explanation of the basis for certain of its tentative decisions, including discussion of alternatives considered and rejected by the Board. 
In the course of reviewing the Preliminary Views draft, the Board tentatively decided that the high-quality municipal-bond-index rate used to discount benefit payments that are projected to occur beyond the point at which plan assets are projected to be fully depleted should be a tax-exempt rate.

Minutes of Teleconference, March 9, 2010

The Board deliberated on issues discussed in Chapter 6 of the Invitation to Comment, Pension Accounting and Financial Reporting, related to accounting and financial reporting requirements for employers participating in cost-sharing multiple-employer pension plans. The Board specifically discussed issues related to liability and expense recognition by these employers.

The Board tentatively decided to require all employers in a cost-sharing plan to recognize as net pension liabilities, pension expense, and deferred pension expense their proportionate shares of the employers’ collective net pension liability, pension expense, and deferred pension expense. The Board tentatively decided that the collective net pension liability, pension expense, and deferred pension expense should be calculated using the same measurement and attribution approaches that previously were tentatively decided on for sole and agent employers. The Board tentatively decided that an employer’s proportionate share should be calculated on the basis of the employer’s share of the total annual contractually required contributions to the plan.

Finally, the Board tentatively decided that changes in a cost-sharing employer’s net pension liability due to changes in the employer’s proportionate level of participation in a cost-sharing plan compared to the prior period should be recognized as pension expense in the period of the change.

Minutes of Meeting, February 16-18, 2010

The Board deliberated on issues related to pension liability measurement and expense recognition by sole and agent employers, including the attribution of the present value of expected future benefit payments to financial reporting periods. The Board also continued its discussion from the November 2009 meeting regarding the recognition of the effects of certain events other than employee service in the current financial reporting period that also cause changes in an employer’s net pension liability.

In regard to the normal cost, or service cost, component of pension expense, the Board tentatively decided that a single method—one described in the current standards as the entry age actuarial cost method—applied on a level-percentage-of-payroll basis should be used to attribute the present value of expected future benefit payments to financial reporting periods for purposes of measuring the employer’s pension liability and for expense recognition purposes. The Board further tentatively decided that benefits should be attributed to periods beginning in the first period in which an employee’s services lead to benefits under the plan (whether or not the benefits are conditional on further service, as is the case, for example, with vesting provisions) and ending in the last period in which the employee’s services lead to additional benefits under the plan, as the result of an additional service credit or a change in the final salary or final average salary on which the benefit is based. The Board tentatively decided that if the plan terms do not specify a period, benefits should be attributed over the total projected periods of employee service. In addition, in light of its subsequent tentative decision with regard to the amortization periods for changes in the pension liability due to (1) differences between assumed and actual experience with regard to demographic and economic factors, (2) the effects of changes in demographic and economic assumptions related to measurement of an employer’s pension liability, and (3) the effects of benefit changes that are applied retroactively to past periods of service (see below), the Board agreed to revisit both decisions with the goal of establishing consistent attribution periods for normal cost and these other components of pension expense.

In regard to other components of pension expense, the Board resumed its consideration, begun at the November 2009 meeting, of how certain types of changes in the net pension liability should be recognized by sole and agent employers. These types of changes include differences between projected and actual earnings on the investment of plan assets, differences between projected and actual experience with regard to demographic and economic factors affecting the measurement of an employer’s pension liability, changes in the assumptions to be used to estimate demographic and economic factors on an ongoing basis, and changes in pension benefits.

The Board tentatively decided that recognition of pension investment earnings above or below the expected long-term rate of return should be deferred so long as the net cumulative amount of deferred outflow or net cumulative amount of deferred inflow remains within a corridor of 15 percent above and below the fair value of assets. However, if the net cumulative deferred balance at the end of a financial reporting period falls outside the corridor, the Board tentatively decided that the excess should be recognized as pension expense immediately.

The Board tentatively decided that (1) differences between assumed and actual experience with regard to demographic and economic factors, (2) the effects of changes in demographic and economic assumptions related to measurement of an employer’s pension liability, and (3) the effects of benefit changes that are applied retroactively to past periods of service of plan members should be deferred and amortized over the remaining service lives of individual plan members. (An effect of these tentative decisions would be that changes related to past periods of service of inactive [including retired] plan members would be recognized immediately.) In addition, in light of its earlier tentative decision with regard to the attribution period associated with normal cost (see above), the Board subsequently agreed to revisit both decisions with the goal of establishing consistent attribution periods for all four of these components of pension expense.

Minutes of Meeting, January 5-7, 2010

The Board held an educational session in which actuaries provided explanations and illustrations and answered questions regarding measurements of pension liability and expense using various actuarial cost methods, amortization methods, discount rates, and asset valuation methods. This session was informative only and did not include discussion of project issues.

Following the educational session, the Board deliberated on issues discussed in Chapter 4 of the Invitation to Comment, Pension Accounting and Financial Reporting, related to the measurement of a sole or agent employer’s pension liability. The issues discussed were (a) whether the effects of certain types of projected future changes should be included when projecting benefit payments for the purpose of measuring the pension liability and (b) what discount rate should be used in determining the present value of projected pension benefits.

The Board considered whether the projection of benefits for the purpose of measurement of the pension liability should include the effects of one or more of the following types of projected future changes: automatic cost-of-living adjustments (COLAs); projected future ad hoc COLAs in circumstances in which an employer has demonstrated a pattern of granting ad hoc COLAs in the past; projected future salary increases; and projected future service credits. The Board tentatively decided:

  • That the effects of automatic COLAs should be included in the projection of benefits.
     
  • That projected future ad hoc COLAs, referring in this context to COLAs that are dependent upon a decision to grant by a responsible authority, should be included in the projection of benefits when certain criteria for inclusion (to be further discussed at a subsequent meeting) are met.
     
  • That projected future salary increases should be included in the projection of benefits in circumstances in which the pension benefit formula is based on future compensation levels.
     
  • That projected future service credits should be included both in determining an employee’s probable eligibility for benefits and in the projection of benefits in circumstances in which the pension benefit formula is based on years of service.

The Board’s discussion also addressed the discount rate that should be used to discount projected benefits for purposes of measuring an employer’s pension liability. The Board tentatively decided that to the extent current and projected pension plan assets are expected to be sufficient to provide for payment of benefits in future periods, the projected benefit payments should be discounted at the long-term expected yield on plan assets. Additional benefit payments, if any, required beyond the point at which plan assets are projected to be fully depleted should be discounted using a current high-quality municipal bond index rate.

Minutes of Teleconference, December 8, 2009

The Board discussed issues raised at the December 2009 Pensions Task Force and Governmental Accounting Standards Advisory Council meetings about which the Board would like to receive additional information or have further discussions. The Board did not deliberate on these issues nor did it reach any tentative decisions. Additionally, the project staff previewed with the Board the topics that will be addressed at the January 2010 meeting.

Minutes of Task Force Meeting, December 2, 2009

On Wednesday, December 2, 2009, a meeting of the Postemployment Benefits Accounting and Financial Reporting Task Force was held in New York City. Members of the Task Force provided feedback to the Board and project staff with regard to several issues discussed in the Invitation to Comment, Pension Accounting and Financial Reporting. Topics discussed included liability and expense recognition and measurement issues such as projection of future benefits, selection of a discount rate assumption, and actuarial cost methods. The Board did not deliberate on these issues nor did it reach any tentative decisions.

Minutes of Meeting, November 18-20, 2009

The Board reviewed and deliberated on issues discussed in the Invitation to Comment, Pension Accounting and Financial Reporting. The issues discussed related to the focus of sole and agent employer accounting and financial reporting for pensions as well as pension liability and expense recognition. The Board’s deliberations included consideration of comment letters received in response to the Invitation to Comment and testimony provided at the public hearings.

In discussing the focus of pension accounting and financial reporting, the Board tentatively concluded that a sole or agent employer incurs a pension obligation to its employees (however measured) as a part of the exchange between the employer and its employees of salaries and benefits, including defined pension benefits, for employee services (the employment exchange). The Board also concluded that the pension plan becomes the primary obligor, and the employer becomes the secondary obligor, for that pension obligation to the extent that plan assets have been accumulated to provide for the payment of benefits to employees or their beneficiaries when due, and that the employer remains the primary obligor for that pension obligation to the extent that it is unfunded.

The Board also considered whether sole and agent employers should recognize the unfunded accrued benefit obligation (however measured) as a pension liability. That consideration included whether the unfunded accrued benefit obligation meets the definition of a liability (that is, it is a present obligation, and the employer has little or no discretion to avoid a sacrifice of its resources to satisfy the obligation) and is measurable with sufficient reliability to be recognized as a liability in basic financial statements of the employer. After discussion, the Board tentatively concluded that the unfunded accrued benefit obligation meets the Board’s definition of a liability and is measurable with sufficient reliability for financial-statement recognition. The Board further agreed to consider at a future meeting whether an employer also would report its net pension obligation in some way.

In addition, the Board discussed reporting of changes in the pension liability other than those associated with normal cost by sole and agent employers. The Board tentatively decided to explore the possibility that fluctuations in investment earnings (within corridors to be determined at a subsequent meeting) might not be recognized immediately but, rather, reported as a deferred inflow or deferred outflow and amortized over a period of time also to be determined at a subsequent meeting. The Board further tentatively decided to explore the possibility that actuarial gains and losses, except for those associated with events that are not likely to recur, might be reported as a deferred inflow or deferred outflow, as applicable, and amortized over a period to be determined at a subsequent meeting.

The Board also tentatively decided that changes in the pension liability as a result of changes to benefits of existing retirees should be recognized immediately. The Board tentatively decided to explore the possibility that changes in the pension liability associated with collective bargaining agreements (or similar arrangements) related to active employees might be reported as a deferred inflow or deferred outflow, as applicable, and amortized over the term of the agreement. Finally, the Board tentatively decided to explore the possibility that, except for those changes associated with events that are not likely to recur, changes in the pension liability as a result of changes in actuarial assumptions might be reported as a deferred inflow or deferred outflow, as applicable, and amortized over a period to be determined at a subsequent meeting.

In December 2009, a Task Force meeting will be held to discuss the tentative decisions of the Board and various issues raised in response to the Invitation to Comment. The Board will continue its deliberations on pension accounting and financial reporting issues at the December 2009 teleconference.

Minutes of Meeting, October 6-8, 2009

The Board reviewed and discussed the staff’s proposed plan for considering issues raised in response to the Invitation to Comment, Pension Accounting and Financial Reporting, which was issued in March 2009.

The Board also discussed how additional issues—specifically, those regarding other postemployment benefits (OPEB) and pension accounting and financial reporting by plans—should be considered in relation to the planned due process document and the overall postemployment benefits project. The Board tentatively decided to address issues related to OPEB separately from the currently planned due process document. The Board deferred its decision on whether to include plan reporting issues in the document until further deliberations have taken place.

To facilitate its future discussions, the Board also discussed characteristics of several potential models of the relationships among employers, defined benefit pension plans (or trusts), and employees (active and retired) for financial reporting purposes. The alternatives discussed included models derived from responses to the Invitation to Comment, the current model established by GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, and others. No tentative decisions were reached, and the Board will continue its discussions on the modeling of these relationships during its subsequent deliberations on the issues to be addressed in the planned due process document.

The Board also discussed issues about which it would like further information or educational sessions. In addition, Board members offered suggestions regarding questions to pose to task force members at the upcoming meeting on December 2, 2009.

Minutes of Teleconference, March 31, 2009

The Board reviewed and provided comments on a ballot draft of an Invitation to Comment on pension accounting and financial reporting issues. The Invitation to Comment includes seven chapters on key pension accounting and financial reporting issues. The Invitation to Comment will elicit feedback from readers through a series of questions at the end of each chapter. The Board primarily made suggestions to improve the understandability of the document. Because the Invitation to Comment is designed to present more than one view on the issues in a neutral manner, no tentative decisions on the issues were made.

The Board also reviewed and provided comments on a Plain-Language Supplement that is intended to be read by financial statement users in conjunction with the discussion of issues in the Invitation to Comment. The Plain-Language Supplement contains questions tailored to financial report users who are not also preparers, auditors, or actuaries associated with the financial reports.

Minutes of Meeting, March 10-12, 2009

The Board reviewed and provided comments on a preballot draft of a proposed Invitation to Comment on pension accounting and financial reporting. The proposed Invitation to Comment includes seven chapters on key pension accounting and financial reporting issues. The Invitation to Comment will elicit feedback from readers through a series of questions at the end of each chapter. The Board made primarily editorial suggestions with regard to the draft material. Because the Invitation to Comment is designed to present more than one view on the issues in a neutral manner, no tentative decisions on the issues were made.

The Board also reviewed and provided comments on a Plain-Language Supplement that is intended to be read by financial statement users in conjunction with the discussion of issues in the Invitation to Comment. The Plain-Language Supplement contains questions tailored to financial report users who are not also preparers or auditors of the financial reports.

Minutes of Meeting, January 27–29, 2009

The Board reviewed and provided comments on a draft of Chapter 5 of a proposed Invitation to Comment on pension accounting and financial reporting issues. As proposed, the chapter would focus on issues related to the use of actuarial methods in accounting measurement approaches that include amortization of pension costs, if the Board were to adopt such an approach. The Board made primarily editorial suggestions with regard to the draft material. Due to the neutral nature of the Invitation to Comment, no tentative decisions were made.

Minutes of Teleconference, January 6, 2009

The Board reviewed and provided comments on a draft of Chapter 7 of a proposed Invitation to Comment. As proposed, Chapter 7 would elicit feedback on issues related to financial reporting by pension plans. The Board made primarily editorial suggestions with regard to the draft. Because the Invitation to Comment will present issues in a neutral manner, no tentative decisions were reached.

Minutes of Meeting, December 16–18, 2008

The Board reviewed and provided comments on a draft of Chapter 6 of a proposed Invitation to Comment. As proposed, Chapter 6 would elicit feedback on whether, and how, accounting and financial reporting should be different for the defined benefit pension plans of cost-sharing employers and those of sole or agent employers. The Board made primarily editorial suggestions with regard to the draft.

Minutes of Teleconference, November 25, 2008

The Board reviewed and provided comments on drafts of Chapters 3 and 4 of a proposed Invitation to Comment. As proposed, Chapter 3 would elicit feedback on liability and expense recognition by sole and agent employers, and Chapter 4 would focus on issues related to the measurement of the unfunded accrued benefit obligation by sole and agent employers. The Board made primarily editorial suggestions with regard to the draft. Because the Invitation to Comment will present issues in a neutral manner, no tentative decisions were reached.

Minutes of November 4-6, 2008 Meeting

The Board reviewed and provided comments on a draft of Chapter 2 of a proposed Invitation to Comment. As proposed, the chapter would focus on the objectives of financial reporting identified by the GASB, two fundamental processes related to pensions, and the relationship of financial reporting of information about those processes to the identified objectives of financial reporting. The Board made primarily editorial suggestions with regard to the draft material. No tentative decisions were reached.

Minutes of September 24–26, 2008 Meeting

The Board discussed a draft of an introductory chapter and an annotated outline of the proposed content of other chapters for inclusion in an Invitation to Comment on postemployment benefits accounting and financial reporting. With regard to the introductory material, the Board members tentatively agreed that the chapter should include a concise discussion of relevant pronouncements that have been issued by the GASB since the issuance of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers—including Concepts Statements related to communication methods and elements of financial statements and standards addressing other postemployment benefits (OPEB). In addition, the Board members tentatively reaffirmed a prior decision that although the project as a whole anticipates consideration of issues related to both pensions and OPEB, the Invitation to Comment will focus primarily on issues related to pensions. The Board also tentatively agreed that the introductory chapter of the Invitation to Comment should remind readers that (a) the Board has previously concluded, for reasons explained in the Basis for Conclusions of Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, that pension benefits and OPEB are conceptually similar and should be accounted for in the same manner; (b) conclusions reached by the Board with regard to pensions may have an effect on OPEB, as well, unless the Board finds compelling reasons for different treatment; and (c) the Board will consider the implications of similarities and differences between pensions and OPEB in that regard as a separate step in the project.

Minutes of September 9, 2008 Teleconference

The Board discussed potential questions for inclusion in one or more Invitations to Comment on postemployment benefits accounting and financial reporting. The Board also considered several alternative presentations of potential questions—some that would divide potential questions into two Invitations to Comment and others that would present some or all of the questions in a single Invitation to Comment. In addition, the Board preliminarily discussed whether a plain-language document should accompany the Invitation to Comment as a means of communicating with some members of the financial statement user community. The Board tentatively decided that a single Invitation to Comment should be issued and that the document should include discussion and questions related to both employer and plan reporting. Board members tentatively agreed that the questions in the Invitation to Comment should elicit feedback on:

  • The focus of accounting and financial reporting
  • Issues related to liability recognition and attributing the effects of transactions and other events to financial reporting periods
  • Approaches to measurement of assets and liabilities
  • Parameters (for example, actuarial methods, amortization periods, discount rates)
  • Accounting by employers in a cost-sharing plan;
  • Other, plan-specific reporting issues.

In addition, Board members tentatively agreed that each question (or set of questions) should be preceded in the Invitation to Comment by succinct introductory material to place the questions into context for potential respondents. The Board also tentatively agreed that the project staff should pursue development of a plain-language document to supplement the Invitation to Comment.

Minutes of Meeting, August 19–21, 2008

The Board discussed the general content and structure of an Invitation to Comment on issues related to postemployment benefits accounting and financial reporting. Board members tentatively agreed that:

  • The scope of the Invitation to Comment should include a limited set of key accounting and financial reporting questions derived primarily from the broader set of potential project issues identified in the Technical Plan for the second third of 2008.
     
  • The questions presented should be introduced by a brief history of the project and a concise discussion of financial reporting objectives, concepts, and alternative approaches with regard to the transactions and other events under consideration as needed to provide context.
     
  • The questions included in the Invitation to Comment should focus primarily on pensions. However, conclusions that the Board may reach with regard to pensions during a later stage of the project (and considering the feedback on the Invitation to Comment) also may be applicable, at least in part, to other postemployment benefits (OPEB), based on the Board’s previous conclusion that pensions and OPEB are conceptually similar forms of postemployment benefits. Therefore, consideration should be given to the possibility of including questions about OPEB in the document and the way in which that might be done. Regardless of the approach taken to presenting issues and questions, the scope of the Invitation to Comment should be clearly communicated to readers of the document.

As an alternative to issuing a single Invitation to Comment, the Board also discussed the possibility of issuing two separate Invitations to Comment—one for issues related to accounting and financial reporting by employers and the other for issues related to accounting and financial reporting by plans.

No tentative decisions were reached. The Board requested that the staff explore the advantages and disadvantages of issuing one or two Invitations to Comment, outline potential question sequences for both scenarios, and provide staff recommendations for discussion at the September teleconference meeting.

Minutes of Meeting, July 8–10, 2008

As part of its Postemployment Benefits Accounting and Financial Reporting project, the GASB held an educational session to obtain information and views from proponents of two different approaches to the measurement of pension costs and obligations and expenses by employers. The purpose of the session was to assist Board members in considering issues related to accounting and financial reporting for pension benefits, within the scope of the project. The session was part of the Board’s regular public meeting for July 2008 and proceeded under Board meeting rules. Addressing issues associated with a financial-economics, or fair-value, approach to measurement for accounting purposes was Jeremy Gold of Jeremy Gold Pensions. Addressing issues associated with an actuarial-funding, or asset-accumulation, measurement approach for accounting purposes was Paul Angelo of the Segal Company. Each speaker explained his advocated approach and responded to questions from Board members and project staff at the Board table. Following the individual segments, there was discussion among the speakers, the Board members, and the project staff related to matters raised in the presentations. No deliberations were conducted by the Board and no decisions were made.

Minutes of Meeting, May 21–23, 2008

At this meeting, the Board held its initial discussion of issues related to the postemployment benefits accounting and financial reporting project. Materials for discussion were the GASB Research Findings—Pension Accounting and Financial Reporting by Plans and Employers Applying GASB Statements 25 and 27, 1996–2005—distributed prior to the April 2008 meeting—and an issue paper with further comments on pension measurement, recognition, and disclosure issues identified during the research as they relate to Phase 1 of the project. Board members were in general agreement with the plan to develop in Phase 1 an Invitation to Comment that tentatively will include:

  • An introduction discussing pensions and pension accounting in broad terms as a means of framing the various approaches presented and the questions posed regarding them
     
  • A series of proposed accounting approaches and the way that each would address various facets of accounting for pensions
     
  • Potential advantages and disadvantages of each approach, framed in terms of its effectiveness in achieving the financial reporting objectives of accountability and decision usefulness in the government environment
     
  • A series of questions to respondents.

The Board also expressed agreement with a suggestion to arrange, at the earliest opportunity, an educational session with public-pension experts presenting differing pension measurement approaches that may be characterized as a funding or asset accumulation approach and a fair value approach. This educational session will be held during the July GASB meeting.