GASB Proposes Public Pension Rule Overhaul

The Government Accounting Standards Board (GASB) says two new exposure drafts could give the public more information about how state and local government pension plans are really doing.

Public employee pension plans have been in the spotlight because of allegations that the plans may have promised trillions of dollars more in benefits than they are equipped to deliver.

GASB, Norwalk, Conn., has issued one set of draft guidelines that discusses government plan reporting by plan sponsors and a second set that discusses reporting by plan administrators.

GASB is calling for governments to report a net pension liability that is the difference between the total pension liability and net assets set aside in a qualified trust to pay benefits to current employees, retirees, and their beneficiaries.

Most of the assets would be reported at fair value, GASB officials say.

When computing total pension liability and pension expense, a government would recognize more components of expense immediately.

A government would, for example, have to include the effect on the pension liability of changes in benefit terms immediately, officials say.

Today, a government can defer and amortize the effects of changes over as many as 30 years, officials say.

A plan also is supposed to use a discount that “applies (a) the expected long-term rate of return on pension plan investments for which plan assets are expected to be available to make projected benefit payments and (b) the interest rate on a tax-exempt 30-year AA-or-higher rated municipal bond index to projected benefit payments for which plan assets are not expected to be available for long-term