State Teachers Retirement System of Ohio

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GASB Resources

Overview of GASB Standards

 

GASB 74 & 75

The Governmental Accounting Standards Board (GASB) issued two new financial reporting standards in June 2015. The new standards (GASB 74 and 75) change the way governmental pension plans and their employers account for other post-employment benefits (OPEB), primarily health care, in a manner very similar to the pension reporting standards of GASB 67 and 68.

The objectives of GASB 74 and 75 are to:

  • Improve the usefulness of information about post-employment benefits other than pensions.
  • Improve accounting and financial reporting by state and local governments for other post-employment benefits.

GASB 74 — Impacts STRS Ohio

GASB 74 replaces statement 43 to improve the reporting by state and local pension plans, such as STRS Ohio. These standards apply to STRS Ohio’s Comprehensive Annual Financial Report beginning with the fiscal year ending June 30, 2017.

GASB 75 — Impacts Employers

GASB 75 replaces statement 45 and establishes accounting and financial reporting requirements related to governmental employers whose employees are provided with other post-employment benefits covered by GASB 74. For STRS Ohio employers, this includes the post-employment health care benefits provided by the plan and establishes standards for measuring and recognizing the related liabilities, expense and deferred outflows and deferred inflows of resources.

These standards must be applied to employer financial reports in fiscal years beginning after June 15, 2017. For most STRS Ohio employers, the standard applies to years ending June 30, 2018, and later.

Contribution rates and funding requirements are not impacted by GASB 75. Under Ohio statute, the State Teachers Retirement Board has the discretion to determine the portion of the employer contribution that is allocated to the health care fund.

GASB 67 & 68

The Governmental Accounting Standards Board (GASB) issued two new financial reporting standards in 2012. The new standards (GASB 67 and 68) change the way governmental pension plans and their participating employers account for and report pension liabilities and expenses in their financial statements. GASB 68 requirements apply to various types of governmental pension plans, including cost-sharing multiple-employer plans like STRS Ohio.

The objectives and intent of the new standards are to:

  • Improve accounting and financial reporting by state and local governments for pensions.
  • Enhance the transparency of pension-related information in financial reports of governmental employers.
  • Increase consistency and improve accountability.
  • Standardize actuarial valuation practices.

GASB 67 — Impacts STRS Ohio

GASB 67 amends previous standards to improve the reporting by state and local governmental pension plans, such as STRS Ohio. These changes apply to STRS Ohio’s Comprehensive Annual Financial Report beginning with the fiscal year ending June 30, 2014.

GASB 68 — Impacts Employers

GASB 68 establishes accounting and financial reporting requirements related to pensions for governmental employers whose employees are provided with pensions from pension plans covered by GASB 67 (such as STRS Ohio, a cost-sharing multiple-employer plan). GASB 68 establishes standards for measuring and recognizing pension liabilities, deferred outflows of resources, deferred inflows of resources and expenses. These standards must be applied to employer financial reports in fiscal years beginning after June 15, 2014. For most STRS Ohio employers, the standard applies to years ending June 30, 2015, and later.

Contribution rates and funding requirements are not impacted by GASB 68. Based on state statute, STRS Ohio employers contribute to reduce the liability over a long period of time through a portion of the employer contributions. Due to pension reform changes, STRS Ohio expects the retirement plan’s funding to improve over time, which would lower the liability. The new GASB 68 standards apply to accounting and financial reporting in the employer’s financial statements and represent the employer’s share of STRS Ohio’s net pension liability and expense.

The State Teachers Retirement Board began planning to strengthen the financial condition of the system in 2009. The process concluded when the Ohio Legislature passed Substitute Senate Bill 342 in 2012. The Ohio 130th General Assembly passed House Concurrent Resolution No. 40 “to acknowledge the Governmental Accounting Standards Board Standards 67 and 68 and to pledge the General Assembly's continued support of Ohio's public employers and retirement systems in their mission to provide secure and sustainable retirement, disability and survivor benefits to Ohio's public employees.”

How GASB 75 & 68 Impact Employers

 

GASB 75

Effective: Fiscal years ending June 30, 2018, and later

Replaces: GASB 45

Primary impact: STRS Ohio employers must report their proportionate share of STRS Ohio’s net liability and annual expense for other post-employment benefits (OPEB), primarily health care, in their financial statements.

Requirements

STRS Ohio is a cost sharing multiple-employer plan. All STRS Ohio employers who prepare published financial statements on an accrual basis using generally accepted accounting principles (GAAP) are required to adhere to the standards of GASB 75.

GASB 75 requires employers to include a proportionate share of STRS Ohio’s net other post-employment benefits (OPEB) liability and annual expense in their financial statements for fiscal years ending June 30, 2018, and later. Employers are also required to include additional disclosures in the notes to their financial statements.

Historically, GASB viewed an unfunded OPEB obligations as a future liability rather than as an existing one, allowing information about the total liability to be disclosed in required supplemental information. A shift to an accounting-based approach from a funding-based approach will now require employers to report their share of the unfunded liability of the other post-employment benefits on their balance sheets.

STRS Ohio’s net OPEB liability is calculated as the difference between the plan’s net assets and the total obligations to plan participants as of a specific measurement date. The measurement date is a plan valuation date selected by the employer to report their share of the net OPEB liability in their financial statements. Employers can choose a measurement date of June 30 of the prior or current fiscal year. The decision to use either prior or current fiscal year values is permanent and cannot be changed. For example, if an employer uses prior fiscal year values for their 2018 financial statements, they must continue to use prior fiscal year values each year thereafter.

The employer’s proportionate share of the net OPEB liability, expense, deferred inflows and deferred outflows may represent a significant impact on employer financial statements. The standards only impact financial reporting and do not impact the amount employers are required to fund under Ohio law. The State Teachers Retirement Board under Ohio statute will continue to determine the portion of employer contributions that will be allocated to the Health Care Fund.

Implementation

STRS Ohio will prepare and provide audited schedules to assist employers with the preparation of their financial statements. These schedules will be available in the Employer Self Service (ESS) area of the STRS Ohio Employer Website approximately eight to nine months after the measurement date.

Compliance with GASB 75 requires additional effort on the part of STRS Ohio and each of its nearly 1,200 employers. It also requires coordination with the external auditors of STRS Ohio and its employers. STRS Ohio is committed to assisting all of our employers in understanding and implementing these standards, as well as communicating the information necessary for employer financial reporting.

Please email us if you have questions about the reports or the implementation. A frequently asked questions section is available on our website to answer common questions. Additional information will be added as questions are asked, researched and understood. You may also need to contact your independent auditor or accountant to discuss the effect these changes will have on your internal accounting processes and annual audit.

GASB 68

Effective: Fiscal years ending June 30, 2015, and later

Replaces: GASB 27

Primary impact: STRS Ohio employers must report their proportionate share of STRS Ohio’s net pension liability and annual expense in their financial statements.

Requirements

STRS Ohio is a cost-sharing multiple-employer plan. All STRS Ohio employers who prepare published financial statements on an accrual basis using generally accepted accounting principles (GAAP) are required to adhere to the standards of GASB 68.

GASB 68 requires employers to include a proportionate share of STRS Ohio’s net pension liability and annual expense in their financial statements for fiscal years ending June 30, 2015, and later. Employers are also required to include extensive disclosures in the notes to their financial statements.

Historically, GASB viewed an unfunded pension obligation as a future liability rather than as an existing one, allowing information about the total liability to be disclosed in required supplemental information. A shift to an accounting-based approach from a funding-based approach will now require employers to report their share of the unfunded liability of the entire pension plan on their balance sheets.

STRS Ohio’s net pension liability is calculated as the difference between the plan’s net assets and the total obligations to plan participants as of a specific measurement date. The measurement date is a plan valuation date selected by the employer to report their share of the net pension liability in their financial statements. Employers can choose a measurement date of June 30 of the prior or current fiscal year. The decision to use either prior or current fiscal year values is permanent and cannot be changed. For example, if an employer uses prior fiscal year values for their 2015 financial statements, they must continue to use prior fiscal year values each year thereafter.

The employer’s proportionate share of the net pension liability, pension expense, deferred inflows and deferred outflows may represent a significant impact on employer financial statements. The standards only impact financial reporting and do not impact the amount employers are required to fund under Ohio law. Employers will continue to pay contribution rates as defined in Ohio statute.

Due to pension reform changes, STRS Ohio expects the retirement system’s funding to improve over time, which would lower the net pension liability for employers. Employers are now paying the liability over a long period of time through a portion of the employer contributions.

Implementation

STRS Ohio will prepare and provide an allocation schedule and a pension amount schedule to assist employers with the preparation of their financial statements. These schedules will be available in the Employer Self Service (ESS) area of the STRS Ohio Employer Website approximately eight to nine months after the measurement date.

Compliance with GASB 68 requires additional effort on the part of STRS Ohio and each of its nearly 1,200 employers. It also requires coordination with the external auditors of STRS Ohio and the employers. STRS Ohio is committed to assisting all of our employers in understanding and implementing these standards, as well as communicating the information necessary for employer financial reporting.

Please email us if you have questions about the reports or the implementation. A frequently asked questions section is available on our website to answer common questions. Additional information will be added as questions are asked, researched and understood. You may also need to contact your independent auditor or accountant to discuss the effect these changes will have on your internal accounting processes and annual audit.

GASB Reports

 

The documents below are available to assist you and your auditors in preparing financial statements to comply with GASB standards. If you have questions about these documents, email Leo Wilhelm.

Specific employer financial information is located in Employer Self Service (ESS) under “GASB Reports,” including audited allocation schedules.

GASB 75 Reports

  • GASB 75 Deferred Outflow and Deferred Inflow Amortization Template

    This spreadsheet template can be used to calculate and support the values in the journal entries and the resulting balances on your financial statements. The spreadsheet will open in Excel when the link is clicked. To download a copy of the spreadsheet to your computer, right click the link and select "Save link as…."
  • GASB 75 Example Journal Entries for Fiscal Year 2018

    The amounts included in this example reflect STRS Ohio's plan level totals. You will need to calculate your amounts by applying your school's proportionate share percentage per the Schedule of Employer Allocations to the STRS Ohio totals.

GASB 68 Reports

  • GASB 68 Deferred Outflow and Deferred Inflow Amortization Template

    This spreadsheet template can be used to calculate and support the values in the journal entries and the resulting balances on your financial statements. The spreadsheet will open in Excel when the link is clicked. To download a copy of the spreadsheet to your computer, right click the link and select "Save link as…."
  • GASB 68 Example Journal Entries for Fiscal Year 2018

    The amounts included in this example reflect STRS Ohio's plan level totals. You will need to calculate your amounts by applying your school's proportionate share percentage per the Schedule of Employer Allocations to the STRS Ohio totals.

GASB Definitions

 

Actuarial present value of projected benefit payments
Projected benefit payments discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment.
Cost-sharing multiple-employer defined benefit plan
A multiple-employer defined benefit pension plan in which the pension obligations to the employees of more than one employer are pooled and pension plan assets are used to pay the benefits of the employees of any employer that provides pensions through the pension plan.
Discount rate
The blended rate at which the present value of projected future benefits is calculated. The system’s long-term expected rate of return on investments is used to the extent the plan’s fiduciary net position is projected to be sufficient to finance projected benefit payments. At the point it does not cover the payment of projected benefits, the system must use a rate approximating the yield of a 20-year AA tax-exempt general obligation bond.
Employer proportional share
The allocation of pension amounts (net pension liability and the components of deferred outflows, deferred inflows and pension expense) based on the proportion of each employer’s actual employer contributions to the total contributions of all employers. A Schedule of Employer Allocations will be prepared by STRS Ohio each year. The percentage or proportional share will be applied to the pension amounts and presented by STRS Ohio in the Schedule of Pension Amounts by Employer as of and for each fiscal year.
Fiduciary net position
Fair value of health care fund assets.
Measurement date
The plan valuation date selected by the employer to report their share of the pension liability in their financial statements. The annual measurement date for STRS Ohio employers is June 30 of the prior or current fiscal year.
Money weighted rate of return
A method of calculating period-by-period returns on pension plan investments that adjusts for the changing amounts actually invested.
Net OPEB liability (NOL)
Total OPEB liability minus the plan fiduciary net position.
Net pension liability
The difference between the plan assets and the total obligations to plan participants as of the specific measurement date.
Other post-employment benefits (OPEB)
All post-employment benefits other than retirement income (such as death benefits and disability benefits) that are provided separately from a pension plan, as well as post-employment health care benefits regardless of the manner in which they are provided.
OPEB expense
Change in plan Net OPEB liability attributed to service cost, interest, change in benefit terms and assumptions, investment earnings and amortized experience differences, benefit payments and expenses.
Projected benefit payments
All benefits estimated to be payable through the pension plan to current active and inactive plan members as a result of their past service and their expected future service.
Total OPEB liability (TOL)
Sum of prior year total OPEB liability plus current service cost, interest, difference between expected and actual experience, changes in assumptions and benefit payments.

FAQs

 

  1. What is GASB?
    GASB is the Governmental Accounting Standards Board. It is responsible for setting standards that establish generally accepted accounting principles (GAAP) for governmental financial statements. All STRS Ohio employers publishing financial statements on a GAAP basis will be required to adhere to the standards of GASB 68 and 75.
  2. What are the objectives of the GASB 68 and 75 accounting standards?
    The objectives of GASB 68 and 75 are to improve the accounting and reporting by governmental employers who offer pension and other post-employment benefits to their employees. The standards are intended to improve transparency and accountability and to standardize actuarial practices in reporting pension and other post-employment obligations.
  3. Who does GASB 68 impact and when?
    GASB 68 applies to governmental employers who participate in a pension plan covered by the provisions of GASB 67 (such as STRS Ohio) and who prepare published financial statements on an accrual basis using generally accepted accounting principles (GAAP). GASB 68 will apply to most STRS Ohio employers beginning with the fiscal year ending June 30, 2015.
  4. Who does GASB 75 impact and when?
    GASB 75 applies to governmental employers who participate in a pension plan that provides other post-employment benefits (health care) covered by the provisions of GASB 74 (such as STRS Ohio) and who prepare published financial statements on an accrual basis using generally accepted accounting principles (GAAP). GASB 75 will apply to most STRS Ohio employers beginning with the fiscal year ending June 30, 2018.
  5. Will the standards change how employers fund the STRS Ohio pension plan?
    No. These standards only impact the accounting and financial reporting of pension and OPEB obligations for governmental employers. Contribution rates and funding requirements are not impacted by GASB 68 or 75. Employers will continue to pay the contribution rates as defined in Ohio statute, and the State Teachers Retirement Board will continue to determine what portion, if any, of the employer contribution is allocated to the Health Care Fund.
  6. How is STRS Ohio’s net pension liability determined?
    STRS Ohio will calculate the net pension liability based on an actuarial valuation as of the end of each fiscal year (June 30). An actuarial valuation of future benefits payable to current active and inactive employees for past periods of service will be discounted using a blended discount rate. The difference between the actuarial valuation of future benefits and STRS Ohio’s fiduciary net position (net assets) will be the net pension liability.
  7. How is STRS Ohio's net OPEB liability determined?
    STRS Ohio will calculate the net OPEB liability based on an actuarial valuation as of the end of each fiscal year (June 30). An actuarial valuation of future health care benefits payable to current active and inactive employees for past periods of service will be discounted using a blended discount rate. The difference between the actuarial valuation of future benefits and STRS Ohio’s Health Care Fund fiduciary net position (net assets) will be the net OPEB liability.
  8. When will data for employer financial statements be available from STRS Ohio?
    The reports containing the Schedules of Employer Allocations, Pension Amounts by Employers and Other Post-Employment Benefits by Employer should be available approximately eight to nine months after the measurement date. These reports can be found in Employer Self Service (ESS) under "GASB Reports."
  9. How will each employer’s proportionate share of the net pension and OPEB liability be determined and communicated?
    After STRS Ohio calculates its net pension and OPEB liability, we will prepare and issue an allocation schedule showing the total contributions from all employers, each employer’s contributions and each employer’s percentage of the total contributions. STRS Ohio will also prepare and issue a schedule of pension amounts and a schedule of OPEB amounts showing the allocation of pension and OPEB amounts for each participating employer.
  10. Where can I get additional information about the GASB standards?
    Information is available above under “Resources.” You can also visit the GASB website at www.gasb.org.

Contact Us

 

If you have questions about GASB 68 or 75, contact the STRS Ohio Employer Reporting Department toll-free at 888‑535‑4050 or email [email protected].

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