Background on the GASB's New Pension Standards

  1. What did the Governmental Accounting Standards Board (GASB) approve in June 2012 regarding accounting and financial reporting for pension benefits?

    The GASB approved Statement No. 67, Financial Reporting for Pension Plans, which applies to pension plans that administer pension benefits, and Statement No. 68, Accounting and Financial Reporting for Pensions, which applies to governments that provide pension benefits to their employees. The Statements are available free at
  2. Why did the GASB issue these Statements?

    The GASB periodically reviews its existing standards to determine whether they are effective in supporting accountability and providing decision-useful information for financial statement users. The GASB’s pension standards had been in place for more than a decade, and research indicated opportunities for significant improvement. The new Statements should substantially improve the transparency, consistency, and comparability of the pension information reported by state and local governments and pension plans.
  3. Were the new Statements crafted in response to the economic downturn and its impact on the financial health of many governments and public pension plans?

    They were not. In fact, the GASB began its research to review the pension standards in 2006, preceding the economic downturn. The current economic climate does, however, underscore how important comprehensive, transparent information about the magnitude of the long-term obligations and annual costs associated with pension benefits is to decision makers.
  4. What types of pensions do the new Statements apply to?

    The two basic types of pensions that governments provide are defined benefit pensions and defined contribution pensions. The majority of public pensions are defined benefit pensions, which specify the benefits to be provided to the employees after the end of their employment. By contrast, defined contribution pensions stipulate only the contributions to an active employee’s account each year; the benefits employees will receive after the end of their employment depend primarily on contributions and earnings on the investment of those contributions.

    Plans that are used to provide defined benefit pensions are distinguished based on how many governments they include. Single-employer plans provide benefits to the employees of one employer. Multiple-employer pension plans provide pension benefits to the employees of more than one employer. There are two kinds of multiple-employer plans—agent and cost-sharing.

    The assets of an agent multiple-employer plan are pooled for investment purposes but separate accounts are maintained for each individual participating employer. As a result, each participating employer’s share of the pooled assets is legally available to pay the pensions of only its retirees. In a cost-sharing multiple-employer plan, on the other hand, the participating employers pool both their assets and their obligations to provide pension benefits—meaning that plan assets can be used to pay the pensions of the retirees of any participating employer.

    The new Statements specifically apply to pensions administered through trusts that meet all three of the following criteria:
    • Contributions from employers (and by other governments and entities on behalf of the employers)
    • Assets in the trust are dedicated to providing pension benefits to the plan members.
    • Assets in the trust are protected from the creditors of the employers (and other contributing governments and entities), the plan administrator, and the plan members (for defined benefit pensions).
    The vast majority of pensions are administered through trusts meeting these requirements. The GASB is currently deliberating proposals regarding pensions that are outside the scope of these Statements.
  5. What do the new Statements require?

    Although many of the requirements of Statements 67 and 68 are the same regardless of what type of defined benefit plan a government participates in, there are some key differences depending on whether an employer participates in a single-employer, agent multiple-employer, or cost-sharing multiple-employer pension plan.

    The requirements for these governments, as well as for governments that provide defined contribution pensions and for separate reporting by pension plans, will be found in these fact sheets: